|
They’ve resisted diving into the market for selling their core software offerings online, but with the recession biting into sales, the software giants appear to be giving in.
According to a report in the Wall Street Journal, Oracle is preparing to launch as many as 10 online software offerings in the coming months. That would mark a stark about face for the company, after Chief Executive Larry Ellison said as recently as last fall that he saw little profit in offering software online.
But that was then and this is now. Back in the fall, it was still unclear whether the economy would be dragged into a prolonged recession. And while corporations have cut back on large scale implementations like enterprise resource planning (ERP) rollouts, software vendors offering their services online, like Salesforce.com continue to rack up strong results.
In its most recent quarter, San Francisco-based Salesforce reported revenues increased 23% year-over-year, reaching $305 million. Furthermore, the company’s earnings per share were up 88% year-over-year. That’s the kind of growth the big guys simply can’t ignore.
While Oracle and SAP have cautiously dipped their toes into offering their apps over the Web, they have avoided jumping in with both feet because they didn’t want to cannibalize their very profitable sales and maintenance models. It also requires the software vendors to build expensive data centers in multiple regions to host and manage the online offerings, instead of having the end-customer bear the costs and responsibilities.
“This is an area that they are being forced to look at seriously, rather than there be a desire on their part,” Sunoco Chief Information Officer Peter Whatnell says. “Maybe they’ve decided it’s better to get a third of the profit margin they’ve been earning rather than get none of it.”
Whatnell, who also serves as the president of the Society for Information Management (SIM), says the recession has caused many CIOs to take a second look at online or cloud-based offerings. In the past they may have not considered it because of security or management concerns, but the recession has IT departments searching for ways to do more with less, and online offerings can be an attractive option.
Online software accounts for only $9.5 billion of the $284 billion that will be spent on software this year according to research firm IDC. But while overall software sales have been rising at about 3.4% per year, online software sales are rising by more than 40%.
Only registered users can write comments.
Please login or register. |
