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Oracle Lets Companies Keep Hosting Close To Home

Customers can run apps on in-house hardware, but some are still leery of giving up control

Oracle is trying harder to sell businesses on its vision of the future, in which software is delivered as a service via the Web. The vendor last week expanded deployment options for E-Business Suite Online, a hosting service for its enterprise resource planning, customer-relationship management, and E-business applications. It's also tightening a relationship with NetLedger Inc., an application service provider in which Oracle CEO Larry Ellison owns a majority stake, to compete with Microsoft and Intuit for the small-business audience. NetLedger's accounting applications are now available via to businesses with fewer than 100 employees.

For larger companies, Oracle now offers application, database, and systems management services, administered remotely, letting customers house and manage the servers on which its E-Business Suite Online apps run. Oracle says most software will be delivered as a service within 10 years because that approach lowers maintenance costs. The monthly fee for the service is 3% of software license costs for remote hosting on in-house hardware or 5% of those costs if the hardware is housed at Oracle.

But some customers say that being in charge of the hardware isn't enough. "Software as a service is out of my control," say Pete Sattler, CIO of SPX Corp., a diversified manufacturer in Muskegon, Mich. "I have to continue on their maintenance, and they may do upgrades I don't need."

Since launching in 1998, Oracle's online services have attracted just 125 customers, and been plagued by management and customer turnover as well as schizophrenic relationships with ASPs. "That's not a real good track record," says AMR Research analyst Dave Boulanger. ASPs, including AppShop and Corio, host Oracle applications, but Ellison said last week that such companies "were doomed to failure."

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