Financially, the time is right. Oracle is rock solid, its market value topping $100 billion just this week. And the Redwood Shores, Calif.-based software giant has been busy for the past several years cobbling together the pieces needed to fulfill its plans, from new business applications to an online hosting initiative.
But the company still has several hurdles to clear if it's to be successful in positioning itself as a trusted technology provider, as reliable to the "dot coms" as IBM is to mainline business firms. An overly ambitious product shipment schedule, product marketing miscues and a revenue mix still heavily skewed toward its core database software could derail Oracle's plans, analysts say.
And while the company's principal technology gets high marks, such are the effects of its marketing and publicity machine--along with Ellison's penchant for hyperbole--that Oracle's sales staff often is greeted with a heavy dose of skepticism by technology buyers.
"Oracle's main credibility problem is that whatever they do is launched with huge fanfare with over-the-top press releases, and as a customer, it's hard to tell reality from hype," said Giga Information Group analyst Carl Zetie.
Zetie added that Oracle is famous for claiming everything it does will transform the industry "and is the only product that does what it does."
According to Merv Adrian, another Giga analyst, "Most savvy IT customers already know that [they need to scrutinize Oracle's sale pitch]. The Oracle guy comes in. I'm listening and there's always a degree of skepticism, perhaps a notch lower for Oracle [than for other firms].
"But that doesn't prevent them from leading the database market," he added.
Central to Oracle's ambitious plan is the company's database server software, intended for deployment alongside its Business OnLine software rental initiative, a new XML-based Integration Server and a host of Web-friendly software to manage sales, customer service, supply chain and applications for buying and selling on the Net.
The complete Web enabled suite, called 11i, is due out next year. Taken together, Ellison promises the suite can transform any company, even the most Luddite of brick-and-mortar firms, into an e-business.
The trouble for Oracle has been in delivering on time. Oracle 8i, the company's flagship database server, is still missing a key piece of technology called the Internet File System. It isn't expected to ship until next summer--more than a year behind schedule.
"There were half a dozen things in front of their database, which says to me, perhaps, Larry and his gang are trying to do too may things--Internet directories, file systems, NCs [network computers], applications," he said. "There's an awful lot going there and perhaps its getting too diffuse. And maybe that's one of the reasons they're not delivering on time."
To be sure, the company has succeeded in getting its Net strategy out with aggressive marketing and a strong and cohesive sales force. Its e-commerce plans--including a highly touted recent deal to build an online marketplace for Ford's parts suppliers--have sent the company's stock soaring and pushed its market value over $100 billion.
Yet the loudly trumpeted Net message and seemingly well-rounded product lineup belies the company's dependence on its database software for most of its revenues. Despite plans to provide the plumbing behind many new online initiatives, Oracle still makes most of its money from those bread-and-butter database sales. Of the company's estimated total of more than $4.3 billion in software product license fees for calendar year 2000, only $845 million are expected to come from applications software licenses, according to Banc of America Securities. The company's database server license revenues will comprise about $3.14 billion of Oracle's overall software license sales.
Whether the company's revenues will become less dependent on the database depends largely on the successful delivery of the company's many promised releases, analysts said.
"Sometimes, Oracle's problem is it's too visionary for it's own good, and it ends up doing these things before the market is ready, before standards emerge," Giga's Zetie said.
Part of that problem is attributed to Ellison's legendary hubris. The charismatic chief executive also muddles the company's message at times, analysts say, bouncing from the dream of putting a network computer on corporate desktops for accessing Oracle applications over the Net to a rant against the rival of the moment--a rotating cast which includes IBM, SAP or Microsoft.
Ellison has also pointed the company's guns at customer relationship management software maker Siebel Systems, claiming Oracle is No. 2 in the CRM market and will very soon topple Siebel, though some analysts beg to differ, noting Oracle is not shipping its first complete Web-based CRM suite until next year.
"Not all technology companies come to market with 1.0 products in a 3.0 market and expect immediately to kill the established market leader," Zetie noted.
Melissa Eisenstat, a CIBC financial analyst, said Oracle's traditional stumbling block has been on the applications side. "They haven't done a stellar job in the 'apps' area," she said.
But Eisenstat added that what Oracle is doing now is very new, and the market is up for grabs. "They're getting their sea legs on the Internet," she said.
Ellison speaks passionately against the "best of breed" philosophy, under which corporations pick the best products available and integrate them instead of buying all parts from one vendor, such as Oracle.
"You spend your life trying to connect those pieces," he said during Oracle OpenWorld. To those who choose to keep trying to integrate different kinds of software, "I admire your courage," he said, adding, "For those who think: 'He's just trying to get us to buy Oracle,' you're right."
In a recent ad campaign, Oracle began taking aim at IBM, bragging that Oracle's software helps run nine of the top 10 top business to business Web sites--with IBM being the only holdout.
But IBM contends Oracle can't provide the breadth that IBM offers by partnering with other companies.
"What Larry wants to be is what we are," said Jeff Ramminger, an executive in the communications sector of IBM's e-business division. "We've been doing [what Oracle is talking about] for a number of years," he said.
IBM's services division, largely focused on e-business, accounts for about $25 billion of Big Blue's $81 billion in 1998 revenues. The company's strategy, which differs from Oracle, is focused on providing hardware, software and integration services to companies--no matter what platform they've chosen.
"Most of the people in the marketplace today have decisions they make that impact their ability to pick one single vendor," Ramminger said. "A good lot of what we do is integrating to the products that already exist."
Scott Lundstrom, an analyst at AMR Research, said both IBM and Oracle have strengths in the e-business battle.
"IBM has much more of a well-developed and less-biased view toward the whole application services side of the business," he said. "Oracle, though, has a very strong position as a principal database provider."
That doesn't mean that IBM won't be nipping at Oracle's heels in the database market.
"This is going to be a battle [between IBM and Oracle]," said Forrester Research's Steve Cole.
News.com's Melanie Austria Farmer contributed to this report.