Commentary: Oracle shortfall stems from sales strategy

By Timothy Tow, Gartner Analyst

Oracle's earnings warning spotlighted an area in which the company's applications unit needs to improve--selling to top-level executives.

	See news story: Oracle warning wallops software sector

Oracle said that its shortfall in revenue stemmed from delays in the closing of sales during the last week of its third fiscal quarter, ended Feb. 28. Oracle usually turns in its second-strongest performance of the year in the third quarter. This year's trouble may lead to a very deflated fourth quarter as well--historically Oracle's strongest. As have many other technology companies, Oracle finds that the economic slowdown in the United States has affected its business, with many enterprises deferring purchasing decisions.

Postponements in purchases of applications will have longer-term effects because rivals will get time to improve their competitive position against Oracle. For example, new releases by PeopleSoft and J.D. Edwards will gain traction during this time. The sales cycles for applications are notoriously long, so customers have time to revisit their decision to purchase an application--and do so, in many cases.

So for Oracle, delay will mean that it will have to re-engage even those enterprises that have selected Oracle applications, despite its claims otherwise.

Based on Oracle's comments regarding how planned purchases were lost over the past week, the deals stalled while awaiting approval by top executives in customers' organizations. This situation indicates that Oracle Applications' strategy for selling its integrated e-business suite to CEOs, CFOs and CIOs is not yet effective.

(For related commentary on Oracle and its Oracle9i database, see TechRepublic.com--free registration required.)

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