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Oracle eyes small-business customers

The big fish have been caught, so the software maker is baiting smaller hooks.

Oracle is keeping more than its lawyers busy this summer.

While the software company's legal team battles a high-profile antitrust suit over its plan to buy PeopleSoft, its marketing group has quietly stepped up an effort to sell applications software to small businesses in the United States, according to people familiar with Oracle's plans.

At a time when some observers say the market for big-ticket rollouts of business applications for large enterprises has been saturated, Oracle is now marketing to smaller companies with lower technology budgets.


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Oracle intends to introduce a version of its E-business Suite programs geared toward U.S. companies with fewer than 500 employees as soon as the end of the year, according to sources who requested anonymity. Oracle typically sells the programs to large, multinational companies, who use the software to coordinate administrative tasks such as processing orders, stocking supplies and billing customers.

Under the new initiative, Oracle will bundle its applications software with hardware and services. Though pricing information has not been made public, Oracle will model the U.S. program after a similar one it introduced in Europe and Asia, where packages start at $35,000 for 10 users, an Oracle spokesman said. By contrast, Oracle's large customers usually sign multimillion-dollar contracts.

While the packaging and pricing for the new "special edition" product are new, the software itself is not, analysts said. For companies with relatively basic software needs, that could be a problem. "It's the same product, so it's still a pretty complex piece of software," said Paul Hammerman, Forrester Research analyst. "It could be overkill for some of these mid-size companies."

The company joins Microsoft and Germany's SAP in an effort to coax small businesses into buying new software. Analysts say most of the world's largest companies have already updated their business systems and won't be buying as much application software as in past years.

The U.S. launch of the Oracle program, which debuted overseas over a year ago, entails a new sales model for the company. Instead of relying on its own legion of salespeople to sign up customers, Oracle plans to forge distribution partnerships with computer services firms that cater to small and midsize businesses. Such resellers often have relationships with the smaller firms Oracle wants to reach.

Representatives from Oracle confirmed that such a plan is in the works, but declined to specify details. The project came to light last week during Oracle's antitrust trial when the U.S. Justice Department attorneys held it up as evidence that the market for small-business software is separate and distinct from the market for "high-function" applications sold by the likes of SAP, PeopleSoft and Oracle.

The agency says an Oracle-PeopleSoft merger would harm competition in the market for software that the world's largest corporations rely on to organize their operations. Oracle counters that the agency's view of the market is too narrow and fails to take into account numerous competitors, including those targeting midsize companies.

In a sign that the company is getting more serious about small-business applications sales, Oracle has assigned seven-year company veteran Frank Prestipino to lead the new program. Oracle has tasked Prestipino, who reports to Oracle President Charles Phillips, with overseeing "marketing strategies for Oracle's E-Business Applications in the mid-market," according to Oracle's Web site.

One potential loser in Oracle's push toward small-business customers is NetSuite, an application-hosting company with ties to Oracle. Oracle Chief Executive Larry Ellison holds a majority stake in NetSuite (formerly NetLedger), which sells a product called the Oracle Small Business Suite under a marketing agreement with the company.

Each company insists their partnership remains intact, yet Oracle appears to be distancing itself from the start-up. Oracle no longer features links to NetSuite on its Web site, nor does the Oracle site promote the Oracle Small Business Suite as it once did.