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August 4, 2000

Just three weeks after the abrupt dispatch of its longstanding company president Ray Lane, Oracle Corp this week consigned its direct sales policy to history with the launch of an ASP channel for its enterprise applications.

It announced on Monday (Jul 31st) the creation of a new class of Oracle partners called Oracle Authorized Application Providers. Including leading ASP names such as Agilera, Interliant and Winstar, OAAPs have Oracle's blessing to resell ASP solutions based on its core E-Business Suite of enterprise applications. See related ASP News story on internetnews.com, Oracle Opens Enterprise Apps to ASPs, Jul 31st 2000.

The new move overturns Oracle's previous direct-only policy, under which its own Oracle Business OnLine (BOL) division was the only authorised provider of hosted Oracle enterprise applications. Under the iHost programme that has now been extended to include OAAP partners, the indirect channel had previously been restricted to platform products rather than applications.

That policy would change "over my dead body," Oracle's CEO Larry Ellison had said at the global launch of Business OnLine in New York last October. But in a prediction that has now been fulfilled, ASPnews.com analysis at the time forecast a reversal of the policy "by the end of 2000." See related ASPnews.com story, Oracle BOL spreads its wings, Oct 7th 1999.

Oracle BOL will continue to offer hosted Oracle applications, but it will offer only packaged solutions without any customisation or third-party extras. All other requirements will be fulfilled by partners.

"The message to our sales channel is, BOL is vanilla and clone, [for] anything else you go to the partner," explained Andy Church, director of product marketing, Oracle iPlatform marketing, in a briefing with ASPnews.com last month.

Sales incentives

The new strategy has been backed up by a change in the way Oracle's own sales force is incentivised. Previously, the Oracle sales representative lost commission when a sale went through a partner rather than direct. With the start of a new financial year, there is a new regime in place to encourage more co-operation with channel partners.

"Right now, we have a mechanism to reward the rep [when a sale goes through a partner]," said Jon Simmons, VP of North American sales for ASP. "We're already seeing reps taking deals to the hosting partners instead of fighting deals."

Oracle's direct-only policy had been the right approach while application hosting remained an unproven model, said Church. We felt that letting a third party figure this out during this primary phase was a pretty bad idea, he explained. As a software vendor we want to make these applications work very well on the Web. So weve had an opportunity to do that.

Oracle will now be giving its partners the benefits of BOL's experience in the form of guidance on best practices for configuration, implementation and management.

ASP allies

In line with the new policy, Oracle is winding down the Business OnLine affiliate scheme launched last October, under which third party applications were made available as part of the BOL service. But Oracle reiterated the continuing role of BOL, which signed 20 new customers in a recent 90-day period to bring its customer tally to more than 100. The new customers included xSpeedium.com, CIGNA International, HealthiNet, Mercury Computer Systems, and Bank of Montreal.

Cracks began to appear in Oracle's direct-only policy for ASP solutions earlier this year, when close ASP ally Portera Systems - itself a BOL affiliate - annnounced it would be adding Oracle's application suite to its online service offering, tailored in line with its vertical market focus on the professional services industry. See related ASPnews.com story, Portera adds Oracle apps, Mar 21st 2000.

The move by Portera was the first public confirmation that third parties were hosting Oracle applications as part of vertical market offerings, but not the only example. Several other Oracle partners, including ASP Tequinox and full service provider (FSP) Millennia Vision, had been quietly developing a client base for hosted Oracle apps within their own vertical industry sectors.

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