Oracle Penetrates ERP Market

Oracle posted strong earnings for the second quarter of 1999 before a period of lock-downs on enterprise resource planning (ERP) investments due to Y2K. ERP is a new growth area for Oracle, which is best known for its database product; the current version is Oracle 8i. The world’s three top database products are Oracle 8i, Microsoft SQL Server 7.0, and IBM’s DB2.Oracle had a 1999 second quarter net income of $384 million, which is 40 percent above its 1998 second quarter net income of $274 million. Oracle’s second quarter revenues were $2.3 billion for 1999; its 1998 second quarter revenues were $2.1 billion. During this same period, Oracle’s database sales grew 17 percent and its application sales grew 31 percent, for a total growth in software licenses of 18 percent.Larry Ellison, Oracle’s CEO, said: “The growth of corporate intranets and the World Wide Web is driving demand for both the Oracle 8i database and our applications. We are the only ERP vendor that is growing because we are the first company offering an e-commerce Internet suite. That’s why our application business is doing so well.” Apparently, Oracle’s growth in ERP has come at the expense of companies such as SAP, Peoplesoft, and Baan. SAP, the world’s largest ERP company, is taking Oracle databases out of its IT infrastructure and replacing them with IBM DB2. SAP has also recommended that customers using its new Web-based product, mySAP.com, use DB2, citing DB2’s stronger cross-platform support. In addition, SAP is recommending that new customers use Windows 2000 (Win2K) to implement mySAP.com. Given that most SAP implementations are running on Oracle and that most SAP developers are also Oracle developers, this change will be difficult for SAP. The message is clear: The folks at SAP aren’t happy about Oracle’s move into ERP.Although the third and fourth quarters of 1999 were slow for the ERP market, many analysts speculate that there might be a strong demand for large ERP projects in the second half of 2000. Oracle appears to be well positioned to take advantage of any such demand.