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SaaS: Ellison says 'No' to Reporters, but 'Yes' with Pocketbook
Headlines say that Oracle’s Larry Ellison thinks that SaaS technology isn’t viable. He says that Oracle hasn’t aggressively pursued it because the model for successfully making money with SaaS just isn’t there yet and that the large companies in their installed base don’t really want it.
Ellison said: “… We’ve looked very closely at it, and we think it’s very hard to make money because there is no synergy. To go down market you need a new product and new product development teams. You spend a lot of money developing a whole new product for the low end. But you also need an all new sales force because we don’t call on those customers. We don’t call on small businesses, and it’s very expensive to call on small businesses. It’s very expensive to do ERP implementations in small businesses. The cost of sales is high. The cost of implementation is high. There are virtually no synergies in sales, marketing, and product development and support.”
But Larry Ellison is also the main shareholder of NetSuite, an up-and-coming powerhouse in the SaaS space. In an interesting perspective, Dan Farber suggests that Ellison strategy towards SaaS is much shrewder than that of SAP’s. Oracle is ‘staying the course’ with the traditional software model, only dabbling with SaaS. SAP, on the other hand, knows that the SaaS model looks promising and is gaining mindshare, but SAP’s introduction of their SaaS Business ByDesign platform as a parallel offering to their traditional line of software has served only to confuse their existing customers and to prompt others to question their commitment to the SaaS model.
In contrast, Ellison has presented a consistent software strategy with Oracle. And Ellison’s NetSuite investment provides a solid backup plan should the SaaS model become unstoppable.
