Oracle Struggling For Its Share Of Apps Credibility

Overall database license sales rose 11 percent in the quarter, but application sales fell 9 percent"this despite Oracle CEO Larry Ellison's claim last week that Oracle's apps business was growing at a faster pace than the field.

The company's battered partner community is acu-tely aware of the dilemma. "The only thing the market consistently recognizes them for is the database. If they cannot get recognition for the app server and applications, they're dead," said one Midwestern Oracle solution provider who requested anonymity.

The Redwood Shores, Calif.-based company suffered setbacks four years ago when its 11i applications were beset with bugs. Since then, Oracle maintains it has fixed the issues and bolstered its applications arsenal.

Ellison and CFO Jeff Henley put the best spin on the decline in application sales. "For the full year, we've seen significant relative improvement [in applications]. 11i is very mainstream, very stable," Henley said on the earnings call last Tuesday.

Oracle insiders and partners agree that the company has to penetrate small and midsize businesses, a segment Henley characterized as "Microsoft SQL Server-land." Oracle has to "do a lot better job there," he acknowledged.

At its annual sales confab in Las Vegas two weeks ago, Oracle again said it is serious about fruitful partnering with VARs, ISVs and resellers, after years of conflict.

It is even considering a near compensation-neutral model in hopes of alleviating strife between Oracle's direct-sales force and resellers, sources close to the company said.

Now, if a deal goes through a VAR vs. direct, the Oracle salesperson loses margin. That loss can vary, depending on deal size, from 7 percent to 35 percent.

Oracle is now talking about narrowing that differential to just 5 percent, sources said, although execution details are vague. Oracle would not comment on plans in process.

A West Coast reseller who also requested anonymity said he will not hold his breath. "We've heard a lot of promises over the past two, three years. It's great for them to say these things, but they have to prove themselves," he said.