Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
 Over the last three years Oracle has been on an acquisitions frenzy, spending over $35 billion dollars to purchase smaller companies that specialize in other segments of the industry (i.e. not database software).[1] These acquisitions have increased the number of customers that rely on Oracle for product support. By increasing its customer base Oracle has been able to reduce its software license prices to compete with other software giants, keeping their support fees level and increasing the number of customers requiring their support. Since 2005 Oracle's revenues from new software licenses has decreased from 33.7% to 28.3% through the first three quarters of 2008. Their revenues from software updates and support have increased by 3.4% and their Services segment has increased 2.0%.[2]
[edit] Business SegmentsOracle's business is divided into three segments: software, services and hardware. The software division represents new software licenses, license renewals and product support while the services division consists of consulting, education and on demand hosting services. The hardware division represents the sale of servers manufactured by HP with Oracle software pre-installed. [edit] SoftwareOracle's total revenue is dominated by its software division which pulls in roughly 80% of total revenues each year. Within the software group revenues are split between new licenses (33% of total revenues) and renewals and product support (46% of total revenues).[1] Oracle began making software to organize data in the 1970s with their focus on relational database software. This software is used for storing data and relating different pieces to one another. Database software generally forms the lowest tier of a companies software infrastructure. The next tier, known as middleware, provides integration between the database and the applications that use the data stored in the database. The final tier, applications software, is the software with which users interact. Applications software is often tailored to fit the specific needs of a company. While the original company was focused on database software, Oracle has been expanding its offerings in middleware and applications software as well as providing hardware support and hosting through its On-Demand unit. In Q2 2008, new software liscense sales grew 38% over last year. This growth was spurred by a 63% increase in new application license sales. The 63% growth far outpaces SAP AG (SAP)'s quarterly growth of 15%. Oracle attributes this to an expanding focus on high end industry specific software. In comparison, SAP has shifted downwards by primarily offering Enterprise Revenue Planning (ERP) systems to smaller companies. Oracle also sells off the shelf software products for business that provide services such as e-mail, file servers, and client resource management. While a historically a small percentage of total software revenues, application software in 2006 began to contribute a meaningful amount of Oracle's software revenue. [edit] ServicesOracle maintains a separate business unit that helps customers take advantage of all the features and functionality of its software. Oracle provides services through consulting (16% of total revenues), education (2% of total revenues) and on-demand software (3% of total revenues).[1] These services are offered in a variety of different contexts including in-house services and service by telephone. [edit] HardwareOracle announced that they would begin selling hardware (computer servers) at the end of their first fiscal quarter 2009. The company has partnered with HP to sell servers that come with Oracle database software pre-installed. Oracle claims that their servers can provide faster computing for businesses than other competing hardware providers.[3] [edit] International OperationsMore than half of Oracle's revenues in 2008 came from international clients. This exposure to international markets can help Oracle avoid the effects of a economic downturn domestically.
[edit] Trends and Forces[edit] Technology Advances and Oracle's Role in the IndustryA significant trend in the software and computing industries has been a shift towards what is known as cloud computing, an infrastructure that is based on centralized shared servers. Under this model everything that a company needs in terms of computing will be located and maintained off-site rather than in house. Furthermore, the same company that manages the servers and physical equipment will also license a platform and software to a firm, which can then be accessed over the internet as an on demand service. Under this model businesses are able to save money on various costs including software service, which is a significant source of revenue for Oracle. Cloud computing also offers more efficient processing, storage, and bandwidth usage by centralizing the equipment and optimizing the software. There are a few potential downsides to the cloud computing model, including concerns over the security of centralized computing as well as concerns over the current limitations of bandwidth. A shift towards cloud computing would be a difficult one for companies like Oracle and Microsoft, who produce and distribute software to their clients in a traditional sense. The costs of developing and managing a cloud system are significant and provide barriers to entry. Companies like Amazon, Salesforce.com, Google, NetSuite and RightNow Technologies are examples of those which have already begun offering products based on cloud computing technology. In order to hold its position as a player in a changing industry Oracle will need to develop products to suit consumers' needs as the environment changes. [edit] Open Source Influence on Premium Software ProvidersOpen source software refers to software for which the source code is freely available and distributable. Oracle competes with open source vendors, such as MySQL, and products, such as the Eclipse IDE, but it also benefits from their existence. Open source software is generally distributed free of charge or for only a small payment, and as such it can provide difficult competition for software producers like Oracle that rely on license fees to drive revenues. However, Oracle also benefits from some open source software. Many of Oracle's products are built on the open source operating system language Linux and as a result Oracle can take advantage of developments made in the open source community. Furthermore, open source extensions to Oracle's products frequently help to add to and experiment with functionality and extensions that are often later incorporated into Oracle's products. [edit] Consolidation in the Software IndustryIn the last three years the software industry has undergone consolidation. Oracle alone has spent over $35 billion on acquisitions during this period and other large companies in the industry, including Microsoft, have been buying smaller companies as well.[4] From Oracle's standpoint acquisitions have been a way to expand beyond the database software sector. For the industry as a whole, the consolidation trend can be attributed, at least in part, to a slow economy since mid-2007. Oracle can benefit from consolidated the software industry through strategic acquisitions that expand their customer base. The main benefit that acquisitions can provide for Oracle, beyond a more diverse product line, will be revenues the fees that all Oracle customers pay for maintenance.[2] As their customer base grows, the number of clients that require their software service increases. With more customers, Oracle has been able to lower prices on software license by keeping software service prices constant. As a result Oracle is able to put pressure on competitors like SAP AG (SAP) through lower license prices while growing revenues. In 2004 Oracle acquired PeopleSoft, allowing them to penetrate the human resource management software market. They have also acquired Siebel Systems, a leader in customer relationship management software (CRM), Tetik who produces supply chain management software, and ProfitLogic, an India based banking software producer. Most recently, Oracle purchased BEA Systems (BEAS), a producer of middleware, for $8.5 billion.[5]
[edit] Software Development LanguagesOracle has optimized its software to run primarily on Unix and Linux based operating systems with most of the software functionality intended to be used through the Java programming language. In doing so, Oracle tied its future to the proliferation of Linux and Unix based operating systems and businesses continuing to base their software on Java. Oracle has also made investments into developing productivity software for the Java platform, which further evidences its commitment to the Java environment. While Java and Unix/ Linux are the predominant platforms for business software and enterprise development, Microsoft is making a push into this segment. With its Windows Server Operating system and the .Net programming platform, Microsoft is offering a complete solution for businesses that is not based on Unix/Linux and does not rely on Java. The .Net platform is said to have addressed many of Java's shortcomings and businesses are adopting it because it can provide more productive development of business applications. For many businesses this productivity boost is reason enough to switch and is beginning to affect Oracle's market share. Since inception in 2002, the .Net platform has gained market share and represents approximately 4% of software development today. Java represents about 20% by comparison.[12] [edit] CompetitionThe enterprise software industry is made up of a large number of smaller companies that specialize in a specific area of the business. Because Oracle has products in all three of these areas they faces competition from a large number of companies. [edit] Database SoftwareOracle's competition in the Database Software market includes large corporations like IBM and Microsoft along with many small database software companies like Sysbase, MySQL, Ingres, NCR (NCR), and Progress Software (PRGS). Oracle is however, the clear leader in this market with an estimated 45% market share.[2] In line with their prediction of a more consolidated software industry in the future, Oracle has been strategically acquiring smaller, open source database software producers. [edit] MiddlewareOracle is attempting to further penetrate the middleware market through research and development and by acquiring smaller companies in the industry.[1] As with the database software market, Oracle faces competition from a few large companies and a larger number of small companies that specialize within the industry. The main competitors for Oracle in the middleware market include IBM, Microsoft (MSFT), Novell (NOVL), TIBCO Software (TIBX), WebMethods (WEBM), Informatica (INFA), Borland Software (BORL), Cognos (COGN), Business Objects S.A. (BOBJ), and CA (CA). Oracle's position in the middleware market is not nearly as strong as that of the database software market, but the company is making efforts to expand its middleware product offerings. Oracle holds an estimated 8% market share in the middleware business.[2] [edit] Applications SoftwareOracle's acquisition strategy over the past three years has helped them in the applications software market. Through their acquisitions of smaller applications software providers Oracle has grown their customer base significantly. Their strategy in this market has been lower licensing fees to compete with SAP AG (SAP), while keeping maintenance fees higher.[2] As such, Oracle is hoping that their increased applications software customer base can bring in significant streams of revenue through maintenance fees. Oracle's competition in this market includes SAP AG (SAP), Microsoft (MSFT), Salesforce.com (CRM), RightNow Technologies (RNOW), JDA Software Group (JDAS), Manhattan Associates (MANH), and McKesson (MCK).
 Oracle2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
|
The Shelf
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Edit
History
Bookmark
