Less than a year after Oracle’s (ORCL) Larry Ellison said that online software makers “haven’t figured out how to make money,” his company is planning to sell more software online. Why?
Because with IT spending in the garbage, Oracle needs to find growth somewhere. And as the WSJ reports, customers are looking for leaner, cheaper, Web-based software packages.
Oracle is not alone:
- The WSJ says that SAP plans to release its online purchasing tool and two more applications next year.
- HP will develop online versions of almost all its products.
- Microsoft and IBM have also entered the online software business during the past year.
The business reality: While selling Web-based software may juice growth — the market is growing by 40% a year, versus the overall software market at 3%, according to IDC — it’s going to hurt margins. As the WSJ notes, Salesforce.com has a net margin of 4%, while Oracle’s is 25%.
Image: Pedro Vera