--Oracle to offer social, marketing, accounting in unified service
--Launch caps six-year overhaul of software for cloud
--Cloud is "charismatic brand" for next version of computing
Oracle Corp. (ORCL) will launch its first broad cloud service suite on Wednesday, embracing a strategy Chairman Larry Ellison once called "complete gibberish" and setting its competitive sights on Germany's SAP AG (SAP, SAP.XE) and Bay Area rival Salesforce.com Inc. (CRM).
With its Oracle Public Cloud, the Silicon Valley company will attempt to outflank competitors with a service that includes applications to manage tasks such as sales and human resources. Those will be combined with Oracle's database software and the Java platform to allow users to write custom applications within the cloud.
Customers will each have a "virtual machine," which Oracle says is more secure and allows users to easily move tasks from the Oracle Public Cloud to an on-premise private cloud.
Oracle's cloud comes after a roughly six-year overhaul of the Redwood Shores, Calif.-based company's software to get it ready for the task. During that time, Microsoft Corp. (MSFT), Google Inc. (GOOG) and Amazon.com Inc. (AMZN) have all launched cloud services. Oracle hopes its offering, which integrates cloud software to manage business from customer contact, marketing, transaction and accounting, will prove to be worth the wait.
"For the first time, you are going to have a full (enterprise resource planning) suite available in the cloud," Mr. Ellison told the audience at All Things D last week. "Customers of the Oracle Public Cloud will be more secure, more in control and have a much more modern version of the cloud." All Things D is a tech industry gathering in Palos Verdes, Calif.
The shift toward cloud computing--a broad term for software that runs online rather than inside a device--began in the late 1990s with the emergence of companies like Salesforce.com and NetSuite Inc. (N). The products let companies avoid the cost of installing and maintaining software on their own computer systems, offering instead software that employees can tap through a Web browser with PCs, smartphones or tablets.
Mr. Ellison discounted the cloud then, but he gave a revisionist view last week, saying: "I thought cloud computing was ridiculously hyped and promising at the same time." Rather than an invention, he said cloud computing, "has been a step-by-step progression, moving complexity off the desktop into the network" and calling cloud a "charismatic brand for the next version of computing."
Oracle aims to reach $1 billion in cloud revenue this year, a target it might achieve because of its existing Fusion online business and recent acquisitions. Human-resources software company Taleo, which Oracle bought for $1.9 billion, is expected to generate $379 million in revenue this year, while customer-service provider RightNow Technologies, a $1.5 billion acquisition, is expected to add $268 million. Besides competitive technology, the companies have customers and sales teams that Oracle will leverage to sell its broader cloud offering.
Oracle expanded its cloud vision last week, buying social marketing firm Vitrue, which makes technology to publish and monitor ads across social media. Rival Salesforce matched that move this week buying Buddy Media, which operates social media ad campaigns.
Oracle's Chief Financial Officer, Safra Catz, recently told analysts Oracle's cloud will be "extremely profitable" and estimated operating margins for the business will exceed 50%. "Maybe not this year, but we will get there," she said.
It addition to cloud businesses it has acquired, Oracle also has a big target. "Oracle will very likely take aim at SAP," said analyst Trip Chowdhry of Global Equities Research.
Like Oracle, SAP has been acquiring companies to rapidly develop its cloud, last month offering $4.3 billion for supplier network service Ariba Inc. (ARBA) and earlier buying HR software company SuccessFactors for $3.4 billion. SAP also has customer-relationship management software and back-office tools. SAP announced its own cloud service last month.
"Oracle more or less fills the same markets as SAP, minus the Ariba procurement network," said analyst Rick Sherlund of Nomura Securities.
But the cloud holds risks as well. While Oracle and SAP go after some of the same business, established cloud players like Salesforce.com will grow as well. And pushing cloud services for database and financial management risks cannibalizing sales of enterprise licenses where both Oracle and SAP earn the majority of their revenue.
Oracle intends to tread a fine line into the cloud, growing the business at a pace sufficient to offset moderating growth in enterprise software, with the goal to "retain their wallet share while they build" said Derrick Wood of Susquehanna Financial Group.
-Write to Steven D. Jones at email@example.com.