April 11, 2002 4:00 AM PDT

Oracle: Learning humility?

SAN DIEGO--Oracle may be learning an important lesson in the business-software market: Make the customer happy.

At its annual AppsWorld customer conference, held here this week, the software maker tried to convince customers that it could learn from past mistakes and cater to their needs with its business-applications software.

Chief Executive Larry Ellison, known for his unyielding bravado at industry conferences, struck humbler tones as he spoke to customers.

"We're trying to establish a relationship with our customers where we not only take the time to help you understand how to use our software but how you're running your business," Ellison told a packed hall.

Ellison has underscored his commitment by reorganizing his executive team, shifting responsibility for the company's entire business-applications division to Executive Vice President Ron Wohl and turning Senior Vice President Mark Barrenechea into an ambassador to users of 11i, the company's much-hyped Internet-ready version of its eBusiness software.

Two tempests swirling around Oracle's business applications are just now subsiding. In the first, the company managed to provoke a battle with its own software user group that boiled over last spring, just as Oracle unveiled 11i, which turned out to be filled with bugs.

In addition, Oracle has raised the ire of some customers because of recent changes in its pricing. The company has gone so far as to lash out at a skeptical analyst community, many members of which serve as advocates for particular technologies.

The release of Oracle's 11i collection of business applications--which includes human resources, financial and marketing programs--was viewed as an important step in the company's bid to match rivals like SAP and PeopleSoft in the market. The 11i product is also seen as a significant source of revenue for the company, as sales of Oracle's database software slow and competition increases.

Oracle is hoping its applications business can drive growth as sales of its flagship database software begin to mature. But recent sales figures--made worse by a slump in technology spending--indicate that Oracle has a lot of work to do.

In its most recent quarter, the company posted a 41 percent decline in sales of its business applications. Continued slowness has forced Ellison and his executive team to pull back from predicting where the bottom of the technology downturn might be for Oracle.

In addition, the company remains behind key competitors, such as Siebel Systems in hot niches such as customer relationship management software, or CRM, and German giant SAP in enterprise resource planning software. PeopleSoft, another business applications provider, has also had a resurgence.

Oracle has released upgrades to 11i to alleviate the bug issues, but the problems have forced it to assume an unfamiliar posture for a company used to flexing its muscles and promoting itself unabashedly.

"They've been humbled a bit by the continued success of their competitors," said Aaron Zornes, executive vice president at technology consultancy Meta Group. "At the same time, they understand that they can't use the same tactics they used in the database market. The Larry Ellison bombastic style of marketing doesn't always work in the (business) applications market."

Worst may be over
Customers of Oracle's business software are optimistic that the worst has passed, even as Oracle continues to struggle to get more of its customers to upgrade to 11i.

Only 10 percent of the company's 12,000 business-software customers have chosen to upgrade to 11i--a sign that some are squeamish about diving into the Herculean task of installing the product, a dizzying batch of business programs covering everything from contracts to procurement and manufacturing.

Still, the bug issue seems to be dissipating, making customers more comfortable with the software.

"The Larry Ellison bombastic style of marketing doesn't always work in the (business) applications market."
--Aaron Zornes, executive vice president, Meta Group
"People are getting the feeling--and the confidence--they can upgrade successfully," said Tom Wyatt, president of the Atlanta-based Oracle Applications User Group (OAUG).

William Lawson, chief information officer at Ametek, a Paoli, Penn.-based manufacturing company, has a variety of Oracle business software installed at the company. But he said he wouldn't move to 11i when it came out a year ago because his company has always been "a reluctant implementer of new technology." Ametek has since upgraded to 11i for limited functions.

"Now that it's stable, we'll move," Lawson said, adding that his company "worked its way through" the bugs.

Wohl, the executive in charge of the development of Oracle's business software, admitted this week that the release of 11i has "not been without difficulties," but he said installations of the software are now "smooth experiences."

"We've got mature software at this point," Wohl said.

Then there's the company's rift with its software users. The disagreement stems from Oracle's reluctance to sponsor a conference organized by Wyatt's OAUG that originated in 2000. Oracle at one time went public with a desire to merge the OAUG conference with its own AppsWorld, raising the ire of the OAUG. The two sides have come to terms, with both the company and its nationwide user group continuing to organize conferences.

"The OAUG is cautiously optimistic that the relationship is improving," Wyatt said. "Every relationship is cyclical. It has its ups and downs."

Joshua Greenbaum, principal analyst at technology consultancy Enterprise Applications Consulting, said Oracle still has to improve its relationship with customers.

"A lot of it is perception, but I think they have to mend a lot of fences," Greenbaum said.

 

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