Tech News - Oracle to End Licensing Deal with NetSuite

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Oracle to End Licensing Deal with NetSuite

06/21/2004

NEW YORK (Reuters) - Oracle Corp. has agreed to end a licensing deal with start-up company NetSuite, executives of the two firms said, as Oracle plans to expand its own Web-based products, calling them the future of software.

Web-based software allows customers to purchase the use of software over the Web as needed rather than installing and maintaining programs on their own computers. The business has increasingly attracted large companies such as Oracle and Siebel Systems Inc.

NetSuite allows companies to pay a modest monthly fee to access business software over the Web. It competes with Oracle's own Web-based software and Salesforce.com, an industry pioneer expected to become public this week.

Oracle's chief executive, Larry Ellison, owns a 50 percent stake in NetSuite.

NetSuite started by licensing Oracle's small business brand. Over the years it has built up its name among customers, and only 5 percent of its products now carry the Oracle name.

"We are moving more and more into larger deals," said Zach Nelson, chief executive of NetSuite. "So the Oracle brand is certainly confusing for us as we sell into deals."

Oracle, for its part, said its existing licensing arrangement with NetSuite never went beyond an interesting marketing idea and agreed it could cause confusion among customers in the future as NetSuite grows.

Oracle, the world's second-largest independent software maker, has long been interested in Web-based software but has yet to make its mark in the industry because its focus has been on large international companies.

But Oracle is becoming more serious about the business opportunities. "We have been wanting to cover more of the on-demand market," said Tim Chou, president of Oracle On Demand. "We see this as the future of software."

The company changed the name of its Web-based software unit to Oracle On Demand from Oracle Outsourcing several months ago and started aggressively promoting its Web-based product.

But it remains to be seen whether Oracle will soon become a formidable player in the Web-based software market.

"I don't think the market will be too worried about that until Oracle ships a competitive product," said Chris Selland, an analyst with Aberdeen Group. "The on-demand products are created for small businesses, probably not a great fit for big enterprises. This is really a question about whether Oracle wants to enter the small business market."

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