Oracle's Big SMB Stand

A Renewed Push
Until now, solution providers that wanted to sell Oracle products had to join the Oracle PartnerNetwork, sign a partnership contract and pay annual fees in return for technical and development support, training, and sales and marketing assistance. Those that wanted to sell Oracle's enterprise-class products and receive all OPN benefits pay $1,995 a year. More recently, Oracle initiated the OPN QuickStart program that, for an annual fee of $300, lets solution providers resell SMB versions of Oracle Technology products and receive limited OPN benefits. But even those requirements are too much for solution providers that need to quickly acquire and resell Oracle product licenses to small businesses at very low cost and with few hassles.

As much as 70 percent of Oracle's customers have 500 or fewer employees, said Althoff. But Oracle, despite having a stable of more than 19,000 channel partners, hasn't fared as well selling to businesses with 100 or fewer employees, a market where Microsoft and its SQL Server database reign. Citing IDC market numbers, Althoff says Microsoft SQL Server owns 63 percent of the market for database server deals valued at $6,000 and less. Just matching Microsoft's sales is a $1 billion opportunity for Oracle, he said.

"The thing with Oracle has always been the price point," said Mike Thompson, president and CEO of Groupware Technology, a Campbell, Calif., solution provider that resells Oracle's SE and SE One database software for midsize and small businesses. Oracle has brought its prices down, Thompson said, but convincing customers of that isn't easy.

Phillips and other Oracle executives acknowledge that until recently the vendor's emphasis on product development was geared toward performance and scalability rather than price and ease-of-use. But Phillips maintains that, after years of tinkering, the company "has finally got the ease-of-use and packaging right" and is ready to make a renewed push to small businesses with 300 or fewer employees. In another sign of Oracle's efforts to tailor its products for SMB markets, the company last month debuted an integrated package of business intelligence tools for organizations with between five and 50 users.

While they may have the products, Phillips and other Oracle executives acknowledge that they have work to do in getting solution providers to buy into the vendor's SMB plans. "Our only challenge now is reaching more customers via distribution and resellers," Phillips said. "And our challenge there is to re-educate the reseller."

"They've never really had a strong channel that serves smallbusiness customers like Microsoft or Symantec have," said Forrester Research analyst Michael Speyer, who views the new VAD Remarketer program as a long-term market seeding opportunity. "They definitely have some catching up to do with the small-business players," Speyer said.

Oracle executives point out that 80 percent of all sales of the SE and SE One databases are to companies with 500 or fewer employees. (Oracle doesn't disclose sales of specific products.) But a big chunk of those sales are through Dell.

So perhaps Oracle's biggest hurdle to achieving success in small-business markets is that it's a very difficult company for smaller solution providers to work with. The company's "inflexible" business processes have been "a major inhibitor to VARs selling Oracle software," said Althoff.

The new open-distribution program is designed to remove hurdles that have made it difficult for solution providers to sell Oracle products in deals worth $5,000 and less. "It's just not a market that's well-suited for a direct-sales force," Phillips said. "I think a lot of resellers would like an alternative to Microsoft—certainly the distributors have told us that."

More Products This Summer
Oracle's forte has always been selling enterprise-class software to enterprise customers. Its flagship database product commanded more than 47 percent of the $15.2 billion relational database software market in 2006, according to market researcher Gartner. And the vendor is competing head-to-head with SAP to be the leading supplier of ERP and CRM applications to big corporate customers.

Products covered by the new program include the SE and SE One versions of the Oracle Database 10g, the just-unveiled 11g, Oracle Application Server 10g and Oracle Business Intelligence. The Java Edition of the application server is also offered through the program. Both Windows and Linux versions will be available. Later this summer, Oracle will add to the number of products available through the VAD Remarketer program, but Althoff declined to provide details. Phillips hinted that some of Oracle's Fusion Middleware software could be added.

At the same time it unveiled the new distribution program, Oracle said it is streamlining its SMB software online order booking and fulfillment process for channel partners, distributors and customers—processes that now average eight days and can take as long as six weeks. Oracle hopes to reduce that to two days, Althoff says. The new process, for example, will offer greatly simplified licensing terms and conditions. "It's daunting when you get a 10- or 15-page legal document when you're buying a $5,000 product," said Matt Reaves, vice president at Arrow Enterprise Computing Solutions, Englewood, Colo.

While the new program covers only Oracle Technology products, the vendor is also targeting SMBs with its application software through the Oracle Accelerate program it announced at Oracle OpenWorld last fall. Under that initiative, channel partners can assemble solutions using preintegrated application bundles from Oracle's E-Business Suite, PeopleSoft, J.D. Edwards and Siebel product lines and workflow links between the applications called Oracle Business Accelerators.

Oracle is also trying to foster improved relations with its channel partners through its All Partner Territories program under which resellers get first dibs on selling to new customers in designated geographic areas.