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Oracle giving it away to grab market share

In a bid to snatch the top spot from rival Siebel, the database-software giant launches OracleSalesOnline.com and makes its core sales force-automation software available for free.

A software-giveaway plan could pay big dividends for Oracle.

The database-software giant earlier this week launched OracleSalesOnline.com, a service that will offer businesses Oracle's core sales force-automation software for free. Oracle will charge fees for additional components, such as sales-compensation software, based on a pay-per-use model. Pricing was not disclosed.

Redwood Shores, Calif.-based Oracle has two goals for the new site and the software giveaway: drive revenues by getting free-software users to upgrade to the company?s complete suite of enterprise software, and drive rival Siebel Systems batty.

Analysts said the company will most likely succeed on both fronts.

"Siebel will absolutely find (this move) a threat," said Joshua Greenbaum, an industry analyst who heads Enterprise Applications Consulting. "The threat (to Siebel) is that Oracle will be able to use this to sell an integrated, comprehensive (software suite) that Siebel simply doesn't have."

Oracle's plan is to offer some of the basic components of sales-force automation for free, such as those that manage sales forecasting, contact information and account leads, but charge pay-per-use fees for additional components like sales compensation.

Peggy Menconi, an analyst with Boston-based AMR Research, agreed that the move gives the database-software giant a perfect opportunity to steal market share from rival Siebel.

"This is its biggest attempt to capture market share and to grab attention in the market," said Menconi. By offering the software for free, it lures more companies to try it. "Why wouldn't you (take a) look at it? Now (Oracle's) got a foot in the door" to sell additional software, she added.

Greenbaum said: "The trick with this kind of software is to really and figuratively hook the user in the way that this is the place they go to do their work every day. Once that happens, it's going to behoove the (company) to purchase more functionality" such as tying sales-force software to back-end order processing and other business applications that Oracle provides.

For the record, Siebel's chief executive, Tom Siebel, isn?t worried. Siebel told Bloomberg News that "there's no news here from our perspective, and it


Gartner analysts Michael Maoz and Ed Thompson say that for enterprises focused on customer relationship management software, free could still be too expensive because of related costs and fees.

see commentary

will have no impact upon our market. Oracle has been offering their entire suite of enterprise CRM solutions to the marketplace for free for the past two years. They can't get anybody to take it. Now that they have some Web-based thing that they're using, you know, there's nothing here that's going to impact us."

The two companies have been at war for some time, battling for dominance in the lucrative market. Siebel, which has long held the top spot in the market, already operates a similar site through Sales.com, a venture it spun off last year.

Oracle and other rivals, such as software giants SAP and PeopleSoft, are lagging behind Siebel in terms of license revenues for their CRM products. In its most recent quarter, Siebel said sales from software-license fees were $242.4 million. CRM, or customer relationship management software, automates a company's sales force, marketing efforts and customer service needs.

SAP had no comment on Oracle's announcement. PeopleSoft said it does not plan to offer anything similar.

Other analysts said Oracle?s software giveaway is more indicative of Oracle's poor performance in the CRM market.

"Oracle's claims of $141 million in CRM license revenues in 1999 are an exaggeration," wrote Gartner analyst Michael Moaz. He wrote that smaller players in the market, not Siebel, will suffer the most from Oracle's free software plan.

One such small player, Salesforce.com--which is in part backed by Oracle chief executive Larry Ellison--said it has no plans to offer its service for free. "Customers will see (Oracle's) offering for what it is--an attempt to hedge their bets in the future," said Salesforce CEO John Dillon.

While Siebel is outwardly dismissive of Oracle's plan, Greenbaum said the company surely is taking notice, since Oracle is clearly willing to take a loss to grow its market share.

"The bottom line is they want to hit Siebel where it hurts," Greenbaum said. "(This move) gives them the ability to use OracleSalesOnline as a loss leader to drive customers toward a more integrated Oracle offering...They can afford to do this. They've got the revenues base to do this. This strategy has a good chance of working."