Oracle is also buoyed by its highly successful database management software business, which continues to grow at a double-digit clip despite inroads by IBM and Microsoft. It's still Oracle's money engine, accounting for about three-quarters of overall revenue. So even if the applications effort fizzles, Oracle won't be in immediate peril, analysts said.
So why, then, does Oracle bother? For one thing, it wants to diversify its business beyond database software, where competition and open source programs are increasing threats.
For another, business applications are a much bigger commitment for an IT buyer than are databases and other underlying technology. Business applications can have an immediate impact on workers and their productivity and are hard to replace once they're in. For that reason, the selection of an applications package can take months or years and often involves the top officers of a company. This gives suppliers considerable influence for years.
"If you really want to capture the hearts and minds of the IT food chain, you have to start talking about applications, not [behind-the-scenes] technology," said Joshua Greenbaum, analyst at Enterprise Applications Consulting.
But as an applications supplier, it helps to be big. SAP, the largest of the suppliers, with $9.7bn in revenue last year, is forecasting 10 percent to 12 percent growth in software licence sales this year. The rest of the market is growing revenue at about 6 percent annually.
That's why Oracle is so bent on bulking up. The company's last great attempt in that regard was with a much hyped redesign of its programs called 11i. But the initial release of the product was buggy, and by the time Oracle worked out the kinks, a global recession put a damper on information technology spending that has yet to fully subside.
Now another redesign is in the works, and this one's even more ambitious. Under the code name Project Fusion, Oracle is combining its own software with programs from PeopleSoft, Retek and a company PeopleSoft had acquired called JD Edwards.
It's aiming to release a new product from that effort in 2008 and hopes to blow the competition away with it. In the meantime, SAP and Microsoft, a newer entrant in the market, are working on next-generation versions of competing products that are due out around the same time.
