Oracle Exodus Deal Helps Grow Online Business

PALO ALTO, Calif. (Reuters) - Oracle Corp . in its most aggressive moves yet to sell more of its database and business management software online, said it plans to team up with Exodus Communications Inc.

Exodus, an Internet software services firm that hosts Web sites, will offer Oracle software that Exodus customers can access using the Internet and a standard web browser. The customers themselves do not download the software.

The world's second-largest independent software company Tuesday said it now has 30 companies using its Oracle Business Online offerings, recently adding customers in South America and Europe. Oracle also said it plans to link with consulting firms, such as Grant Thortorn LLP, to further push its business online offerings. The company intends to work with independent software developers that will make their own e-commerce related products available on Oracle's data centers, which can then be used in conjunction with Oracle software.

In statements prepared for a New York briefing with analysts and reporters at 1 p.m. EDT Tuesday, Chief Executive Ellison said Oracle's Business Online initiative aims to be a next-generation platform for selling software over the Internet as a service. The idea is to offer a better alternative to the status quo process, which involves a constant stream of software upgrades that must be laboriously installed on computer servers and PCs.

He said the service is about far more than just finding new ways to hawk its market-leading database software and business management software, where it lags German giant SAP AG as No. 2.

In fact, Ellison says, "The software business is on its way to becoming a service business," Ellison said in an interview Monday, adding that -- not surprisingly -- the Internet is the biggest change in his industry since he founded Oracle in 1977. "If you are (an independent software vendor), are you going to build for Windows NT or are you going to build for the Internet?"

Indeed, even PC software juggernaut Microsoft has indicated recently that it's racing to develop a new Internet-based version of its top-selling Microsoft Office software, because it says customers are asking for it. The company admits it is examining different pricing models that would be more Internet friendly.

Of course, the Internet helps all start-ups, allowing the smallest of companies to gain the Web presence of a global company. But it also is a boon for well-heeled players like Oracle, which first started talking about Business Online a year ago. The goal is for 10,000 users by the end of this year, and Oracle is on track to hit that number, Ellison said. Next year, the goal is 100,000.

"Now that you can get at any system over the Internet, why not park your business software systems on the Internet and run them over the Internet?" said Banc of America Securities analyst Robert Austrian. "As such, Oracle's got a great platform for such applications and they're trying to be a catalyst for the whole industry."

Indeed, that is Ellison's plan.

"We want to create this electronic community, for purchasing, accounting, sales force management, everything," Ellison said. "There will be a whole economy built around this thing."

Analysts are saying already that the market for software and services delivered online, such as those provided by Exodus and Oracle, will reach into the tens of billions of dollars in the next few years. Other companies, too, are jumping into the so-called application service provider market.

Intel Corp., the world's largest computer chipmaker, in just the last two weeks has opened the first of its data centers, where it will host Web sites for small and medium-sized businesses. Ellison noted that Oracle is continuing talks with Intel to provide the chipmaker with its own software for Intel customers to use.

In addition to the deal with Exodus and the talks with Intel, Ellison said his Redwood Shores, Calif.-based company is in talks with other service providers, such as providers of communications networks Qwest Communications International Inc. and No. 3 carrier Sprint Corp., which has agreed to be bought by MCI WorldCom Inc., the second-biggest U.S. long-distance company.

"We're entering a stage where the systems themselves and the business software is run on an outsourced basis," said analyst Austrian.