In December 1998, on the back of a series of good quarterly results,operating system, is designed to smash the Windows monopoly. Is this a poke in the eye for Microsoft or another piece of pie in the sky from a company that should know better? Larry Ellison, founder and chief executive of Oracle, announced a plan designed to push more business through indirect channels and win back the mid-market from Microsoft.
But project Raw Iron, scheduled for a March release, is not just an alternative to Windows. The dedicated internet server, with only the bare bones of an operating system, is a whole computing architecture, which Oracle claims will revolutionise the way people do business.
But the industry is sceptical. So many vital questions remain unanswered.
Are the internet and the disparate networks along which it travels secure enough for important data? Is a single-function server best for businesses with diverse needs and processes? Which mainstream hardware manufacturers will build these machines? Who will sell them?
And how will re-sellers make margins on cheaper systems that boast little or no installation and support costs?
Although the database vendor has historically enjoyed considerable success, it has, until recently, eschewed an aggressive marketing strategy with regard to SMEs, in marked contrast to Microsoft. Instead, Oracle has concentrated on a high level of investment in research and development and a healthy obsession with ensuring that its products outperform rival offerings at the high end. A long-standing proponent of the network computing architecture (NCA), the vendor has a compelling philosophy about minimising complexity and cost on the desktop. It's just that few people believe it. To date, only a small percentage of users have rejected the shift to the Wintel-based client-server model.
The way Oracle has traditionally reached many of its SME-level customers is quite different from what one might see as conventional routes to market. Unlike Microsoft's vast army of resellers, many of which have simply attached themselves to the most lucrative coat-tail, Oracle's SME channel largely comprises specialist software designers.
These independent software vendors, or ISVs, recognise that Oracle is one of the most stable platforms for creating database systems. They rely on the software to support the customised applications that they design and implement for a diverse range of clients, some of which are IT-savvy and, in contrast, some of which don't even realise they are using an Oracle application.
But although Oracle is mainly a direct operation, taking nearly 60 per cent of its revenue from servicing customers, it does attempt to look after its channel.
Last September, while most software resellers were complaining that their margins were being eroded, Oracle announced its internet-enabled database, 8i, would be free to its accredited ISV community. Developers could standardise their internal systems on the technology at no additional cost and pay the vendor a peruser royalty when they sold a system based on the platform.
The following month, Oracle announced a further business initiative, aimed at reclaiming some of the mid-market ground that had gradually been taken up by Microsoft's SQL server and Windows NT. It allocated $500 million for the specific purpose of increasing the profile and penetration of Oracle resellers in this space. Measures in the UK included the establishment of a dedicated channel marketing team within Oracle's general business unit, the recruitment of additional personnel and a reallocation of financial resources to concentrate specifically on marketing support for Oracle resellers.
Jenny Edmondson, channel marketing manager at Oracle who is responsible for implementing the scheme, says: 'We are shifting the focus of our channel investment from sales support to marketing, to help generate user demand for Oracle products supplied through resellers and also destroy the false perception that Microsoft is the only alternative for the mid-market customer. Revenue in this area has increased by 130 per cent since last year, so it makes sense to focus our efforts on a growing market.'
Oracle also increased the potential size of the market served by resellers.
Previously, all sales worth more than #200 million would automatically be handed to the vendor's direct sales force. This band has been raised to #300 million. Now, any sales below this figure are considered to fall within the mid-market definition and are dealt with by the channel. By anybody's standards, this represents a potentially huge business opportunity for Oracle resellers.
These measures culminated in the launch of the company's most ambitious project to date.
In November, at Comdex in Las Vegas, Ellison announced an alliance with Sun Microsystems, plus the project Raw Iron. It appears he deliberately positioned the announcement as the kind of ground-breaking declaration that would reverberate through the industry's communication channels and be felt by anyone with even the slightest interest in IT development. But while just about everyone has heard of Raw Iron, no one - not even Oracle and Sun - is entirely sure what it means.
According to Ellison, Raw Iron will see 8i embedded into super-fast, single-function servers that will manage the information resources of companies of varying size and make-up. The machines, due to start shipping in March, will do away with the need for an intricate and weighty OS. Only the basic functions of a conventional OS will be retained.
While the original concept of network computing proposed thin client technology, Raw Iron introduces what might best be described as thin server.
Oracle claims the dedicated servers will be cheaper - both initially and with respect to ongoing maintenance costs. It also boasts that the machines will run more than 100 times faster than a Windows-based system.
Strategically, Ellison made no secret of the fact that Raw Iron is aimed directly at Microsoft's jugular. And it comes at a time when the industry leader is more vulnerable than ever, suffering from both the legal assault in the US and continual delays to the release of Windows 2000, formerly NT 5.
'This all falls under a simple umbrella,' says Ellison. 'We will compete on total cost of ownership and can deliver a lower purchase price and higher service. We are not doing this as a marketing stunt. This is a serious effort to reduce computing costs by simplifying systems management.'
And what about Sun, the other great proponent of network computing? Under the terms of the agreement, the vendor will provide a slimmed-down version of its Unix OS - Solaris - upon which the first Raw Iron servers will be built. In return, Sun will receive free access to the 8i database source code for use on its own hardware offerings. Oracle says it plans to use the best features from other operating systems, including Linux, BSD and perhaps even Apple's System X. But while the implication is that Raw Iron is open to all and sundry - except, of course, Microsoft - currently only Sun is a confirmed partner.
Andy Bailey, UK director of product, services and alliance marketing at Oracle, explains why the database vendor has embarked on such an ambitious project and what he sees as its advantages.
'It all came about following a survey of our business customers,' says Bailey. 'We found that about 50 per cent of them run their database applications on dedicated servers. If that's the case, there seems little point in having an OS containing 30 or 40 million lines of code. Oracle ran perfectly well on NT 3. You could argue that an upgrade to NT 4 and all the associated costs was irrelevant to both ourselves and a large proportion of our customers.
'The huge complexity of a standard OS creates two outcomes. First, it means you have to pay for it upfront, and second, there's more chance that something can go wrong. The last thing a company wants, whatever its size, is to jeopardise its core business functions.'
According to Bailey, Raw Iron users will also gain from the way these systems are serviced. 'Raw Iron will appeal to businesses without technical expertise and those that don't want to get involved with IT administration. The systems can be managed remotely through Oracle's Business Online Service. There is even a scenario whereby the server will not be on site.'
John Tutcher, head of corporate affairs at Sun, reiterates this point: 'Smaller organisations that rely on state-of-the-art systems, but do not have their own IT departments, will be particularly attracted to this way of working.'
Bailey offers the example of a doctor's surgery, where GPs with no knowledge of IT can access and manage all their patients' records through a desktop browser, connected to a remote server via a secure network, which is maintained by an Oracle administrator in Reading. 'By centralising the service, the savings are significant,' he says.
On paper, the argument seems convincing: super-efficient, low-cost plug-and-play systems, connected via the Net and managed remotely by an experienced and dedicated support team, with no need for expensive NT server licences or perennial upgrades.
In practice, however, many questions remain unanswered, which has generated an air of scepticism among industry observers.
Anne-lees Wang, Oracle watcher at IDC, is not convinced that Raw Iron will prove an immediate threat to the hegemony of Windows. 'In the long term, I think the corporate community will switch to a network computing model,' she says. 'But this change will take time. There's no way something like Raw Iron will just appear and replace the installed base.'
She continues: 'Oracle is primarily a technology company and in many ways it is ahead of its time. But the regional networks on which systems like this would operate are just not reliable enough yet. The technology just isn't ready.'
Wang is also critical of Oracle's attempt to cast Raw Iron as the latest knight in shining armour, ready to slay the Windows dragon. 'Trying to position this release as a direct competitor to Microsoft is stupid,' she says. 'It leaves everyone cold because it doesn't emphasise its own use value. An announcement like this must be based on what it can offer the user - it should not be grounded in competition.'
David Wells, principal consultant at Ovum, has other concerns. Like Wang, he agrees the future of corporate computing lies in an NCA-type model, but he expresses concern that the initiative goes against the philosophy of openness and flexibility: 'While Microsoft has moved to Lans and NT servers and become less dependent on the desktop model, Oracle and Sun appear to be running away from flexibility and locking themselves into a closed architecture. This seems like a reactionary strategy. Ellison is simply doing whatever Microsoft is not.'
Paul Adams, services director of accountancy systems reseller and consultancy group Tate Bramald, agrees that Raw Iron scores high on rhetoric, but says it stands little chance of immediate success in the SME market. 'The consensus is that this is just another case of Larry Ellison taking a swipe at Microsoft,' he says. 'Apart from the original announcement, we have heard nothing about this release.'
Adams also questions the value of a system that Vars, such as Tate Bramald, would find difficult to service - if given the option. In the proposed Oracle model, after-sales services would be supplied direct, cutting out ongoing revenue for anyone other than a handful of specialist Oracle resellers.
He adds: 'Customers might be attracted by the promise of overall performance gains but they must ask themselves: "Do I really want to shift to an architecture I cannot support and that most of the Var channel is unable to support?"'
He adds: 'The only obvious advantage is the savings on NT server licences. But this isn't expensive and Microsoft could easily adjust its licensing model if it felt it was losing the competitive edge.'
The final and perhaps most cutting criticism of the project centres on who will build and sell the machines. At Comdex, Ellison said the large PC vendors would support Raw Iron and supply customers through their normal channels. Compaq and Dell have both confirmed that they are not, as yet, involved in the project, with Dell stating it would consider it 'if customer demand was there'.
However, Tutcher was adamant that Sun would not sell Raw Iron while the Oracle channel was so geared towards software. One systems provider was less than enthusiastic, saying: 'We would not want to be seen as a hardware reseller.'
The truth of the matter is that Raw Iron is still at the planning stage.
Success for Oracle and its resellers will prove elusive unless the PC makers get on board. But one thing is absolutely certain: with March not far off, Raw Iron needs to gain some weight - and fast.
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