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Oracle lines up application-hosting partners

The company announces a slew of new service partners that will host the software giant's Internet-based business applications.

Moving further away from its initial application-hosting strategy, Oracle today trumpeted a list of new service partners that will host the software giant's Internet-based business applications.

The partners, which will be added to Oracle's iHost initiative, include Agilera, BlueMeteor, Center 7, GlobalCenter, Hostcentric, Interliant, Nupremis, Sallie Mae Solutions and Winstar.

The partners will provide a range of hosting services for state and local governments and higher education. They will also develop their own products using Oracle's application software that automates a company's sales, marketing, financial, manufacturing and human resources needs.

Sallie Mae Solutions, for example, will host Oracle software for midsized colleges and universities. The company will also host Oracle's Web-based financials and human resources applications in conjunction with its own suite of software that automates admissions, financial aid, registration and billing.

The move is contradictory to earlier statements made by Oracle that it would not form partnerships for software rentals. The company had repeatedly said it would only rent its business applications via its own application-hosting unit, Business Online.

But earlier this year, Oracle quietly signed a deal with Portera, an application service provider (ASP), to make Oracle's software available to a select group of customers. Portera hosts Oracle's financial, human resources and purchasing software.

Analysts say it is imperative for Oracle to continue broadening its hosting strategy.

"It's a phenomenal step for Oracle," said Dave Boulanger, an industry analyst at Boston-based AMR Research. "Oracle is realizing that the world doesn't revolve around Oracle."

Boulanger also said the move puts Oracle on a "level playing field" against rivals PeopleSoft, SAP, J.D. Edwards and others who have already partnered with numerous ASPs to host their core software.

"This is a significant change in Oracle's hosting approach," added Meta Group analyst Doug Lynn. "They can't be the bully in the schoolyard anymore."

ASPs host software so customers don't have to install and manage it themselves. The software is accessed from desktops and is remotely monitored from a data center. Customers pay outside providers to run everything from complicated enterprise software installations to more common desktop applications, which are often difficult to maintain.

The nascent market has garnered attention from a wide range of technology providers, including hardware makers IBM and Dell Computer and communication providers AT&T and Qwest Communications International. Companies are hoping to cash in on what is expected to be a lucrative sector.

AMR Research predicts the ASP market will reach $4.7 billion by 2004, with a compound annual growth rate of 153 percent. In a recent study, the research company also indicated that many ASPs will begin to target specific industries and partner with systems integrators to help implement those applications.

"For (Oracle) to penetrate the small and midsized enterprises, they have to establish relationships with technology providers, ASPs, business partners who these businesses know and are comfortable working with," Lynn said, adding that customers are demanding a provider that has expertise in targeted industries and knows its specific requirements.

Boulanger said the short-term challenge for Oracle is to continue building successful partnerships to sell its software as a service.

Separately, Oracle said it has signed 100 customers via its Business Online application-hosting service. In its most recent quarter, chief executive Larry Ellison said Oracle's Business Online service is breaking even and will become profitable next quarter. The company launched the service nearly two years ago.