Oracle's Ellison: Our target is SAP

Because as the No. 1 enterprise resource planning software maker, SAP is in his way. But to best SAP, Oracle's outspoken chief executive says he will first need to overtake front-office rival Siebel Systems--and any other company that stands between him and his goal to be a customer's one-stop shop for both front- and back-office business applications.

Ellison has long been known for his brash ways and a competitive drive that extends from the boardroom to the sea with his passion for yacht racing. And he must be doing something right: His $9.1 billion company is as well positioned as any of its rivals to come out on top.

But try as he might, Ellison has not been able to seize the same Internet limelight that has elevated other Silicon Valley executives to virtual movie-star status as the Web's popularity has exploded. Despite experiments ranging from the network computer to the Oracle 8i database, the company remains firmly rooted in its corporate software origins.

So analysts question whether Ellison's legendary ambition--which many believe is accompanied by a quest to become the next Bill Gates--can realistically stray too far from the company's bread and butter: Oracle's core ERP applications and its huge database business.

Although Oracle has a more diverse business than its ERP rivals, it hasn't emerged unscathed from the recent downturn in software license sales. The company's stock took a small tumble last month after the company failed to meet some analysts' first-quarter expectations.

Oracle executives also recently admitted that the company has muddled the marketing strategy for its Oracle Application Server by selling it as a stand-alone product, while also selling the Oracle 8i database with built-in application server features.

Ellison sat down with CNET News.com here this week to discuss not only the application server market, but also the latest at Apple Computer, where he serves as a board member, and the spin-off of several Oracle divisions.

News.com: Oracle missed some analysts' estimates in the first quarter. Can you discuss what you expect for the quarter ahead?
Ellison: After [the first quarter], the entire management team thinks that we'll have a better year this year than last year in regards to the growth in our software licenses.

Even though we're in a year that crosses the Year 2K boundary, we're very optimistic about our business. In the ERP [enterprise resource planning] space, where we compete with SAP, PeopleSoft, Baan, and JD Edwards, we're the only ERP company that's growing.

PeopleSoft is getting smaller, Baan's getting smaller, SAP's getting smaller, JD Edwards is getting smaller and we're getting bigger in ERP. We're the fastest growing CRM [customer relationship management] software business in the world. We continue to take market share in the database business against all competitors. Right now, things are going pretty well. We're pretty optimistic.

Today's event was held to talk about the future of Oracle Business Online, the company's Internet applications hosting service. Can you give us an update on whether Oracle has any intention of spinning off the business as it has others?
We took Oracle Japan public and it's got a valuation of about $10 billion right now. We took Liberate [A company that makes software to connect set-top boxes and other hardware to the Internet] public and it's got a valuation of just under $2 billion right now. We plan to take E-Travel [the company's travel software division] public. The next IPO we'll have is E-Travel, which we're very, very optimistic about. If the markets continue to grant very high valuations for Internet companies, we'll continue doing that.

What's new with Apple Computer? It finally released the iBook, but Apple doesn't have a handheld yet to compete against the PalmPilot or the Windows CE devices. Any word on Apple's future plans?
With Steve [Jobs] back, Apple has again become an innovation leader in our industry: Fabulous technologies like the new Apple display technology and fabulous industrial design, fabulous new software announcements. Will Apple do something in handheld? Steve doesn't like to pre-announce things.

My opinion is that Apple is going to be the great digital appliance company. As the appliances become digital, the very coolest digital appliances will come from Apple--the easiest to use, the prettiest to look at, the most successful will come from Apple.

Can you give us an update on Oracle's plans to build a network computer for the education market? Is that ever going to ship?
Yes, we've got the network computer down to about $150. It's a very, very cool, new machine. We actually have it up and running and we'll be starting a little spin-off to get that thing rolling [soon]. It's a small box, not unlike our other network computers except this has a CD-ROM in it and on the CD-ROM it has Linux and Netscape and some other things. It has no hard disks. It has Ethernet and a 56K modem. It plugs into a monitor and it gives you Internet access, does everything Netscape Navigator does.

How do you see the application server market shaking out? There are dozens of competitors in the market, is Oracle going to stay on top?
I think we will be the leader. There are lots and lots of little companies now in the nascent market. We don't think it makes sense that there are a handful of database companies and dozens of application server companies.

We think we have a great application server and it keeps getting better, and we think we'll be the number one provider. But, right now the market is still so youthful and so fragmented. It's hard to say, but I'm pretty optimistic.

Some analysts and customers are confused by your application server strategy. You've built an application server into the Oracle 8i database, but you've also got a stand-alone application server. Can you set the record straight on this one?
We do have an application server built into the database for someone who wants to build a very simple environment with just one server.

Separating the application server from the database server is for larger environments. That's what our applications server is meant for, it's meant for larger companies in larger environments. It's very important for what we're doing, but keep in mind, again, this is a very, very small business right now globally. If we had 100 percent of the application server sales in the world, you wouldn't even notice.

Your rival Siebel says your customer relationship management (CRM) applications [which help companies track sales and customer service] do not stack up to theirs and some analysts agree. Could you respond to that?
Gartner Group did a report a couple of months ago saying that we were dead last in CRM in terms of features and functions. They've [since] moved us up to second in CRM.

We're the No. 2 CRM company in the world and we're growing faster than Siebel--much faster than Siebel--and the reason is our CRM software is pure Internet.

Now, Tom [Siebel] has purchased a new word processor that inserts the word "Web" into every sentence that comes out of a document from Siebel. Siebel is the classic born-again Web company. Their engineers have done a good job of changing the brochures, but they have a lot more work to do on the software.

The following are true of Oracle CRM: The only way to access an Oracle CRM product is through a Web browser. Now, ask Tom that same question. Tom has a problem with the truth. They still sell primarily client-server stuff. HP picked us over Siebel because we have modern Internet technology and they have the old, client-server stuff. We expect to pass Siebel pretty quickly.

Now that most large business applications firms are trying to come up with a CRM strategy, what do you see happening to the smaller players--Clarify, Vantive, and Pivotal?
If Siebel can't compete, doesn't have the resources to compete, certainly poor Clarify or Vantive doesn't have the resources to compete. In the context of an overall push, our target isn't Siebel, our target is [No.1 business software maker] SAP. Oracle's target is not Siebel, it's SAP. The way we beat SAP is to beat Siebel in CRM and to beat Ariba in Internet procurement and surround SAP. We need to win in this new era of Internet computing. We need to become the No. one application company.