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UpShot Presents Problems for Oracle


By Hal Plotkin
Silicon Valley Correspondent

Much has been made over the past few years of the long-running feud between Oracle Corp. founder Larry Ellison and his archrival, Microsoft Corp. {MSFT} founder Bill Gates.

But some industry watchers in Silicon Valley say Ellison now has an even more-important battle on his hands than anything Oracle has confronted in the past with Microsoft.

Oracle’s fate, in the end, may well hinge more, they say, on the outcome of a less-watched though already-started skirmish between Oracle and a new generation of start-up application service provider firms.

One ASP in particular, Mountain Valley, Calif.-based UpShot, is gaining traction in a market Oracle desperately hopes to call its own.

ASPs are businesses that allow other businesses to buy whatever software they might need on a pay-as-you-go basis. Instead of keeping their data in-house, customers usually use a Web browser or some other easy-to-use software to access their stored data, which is maintained by the ASP.

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UpShot, for example, provides an increasingly popular ASP-based sales-force automation software service that allows employees in a company to stay current on each individual customer contact, special requests and inventory and product-design issues, among other features.

Oracle recently began offering a similar product free of initial charge in hopes of killing UpShot and similar start-ups in their cribs.

But Oracle appears to have a real fight on its hands, particularly in the sales-force automation market, which could foreshadow similar problems Oracle may face as it tries to enter other emerging online business-application areas.

Oracle even risks alienating some potential customers, some analysts say, by trying to use its bare-bones free sales-force automation offering as a tool to drive customers to purchase the more-expensive Oracle consulting services that are required to make it as fully functional as UpShot’s off-the-shelf product.

“There’s just no question that UpShot has a winning approach,” says Tim Bajarin, an analyst at Creative Strategies Inc., based in Campbell, California. “It’s a very, very solid company that understood their market right from the beginning.”

Bajarin founded one of the industry’s first sales-force automation trade shows, which has more recently morphed into the big annual Customer Relationship Management Conference and Exhibition now sponsored by the Andover, Mass.-based Digital Consulting Institute.

Ironically, sales-force automation is a market that Ellison let slip between his fingers once before, back in 1993, when one of his top salesman, Tom Siebel, left Oracle to found Siebel Systems Inc. {SEBL}, where he made his name and money helping to automate sales-force operations using the client-server architecture that pre-dated the advent of the Internet as a business platform.

“Tom Siebel goes off and becomes a billionaire, and Ellison has got to look at that and say, crap, we could have had all that,” Bajarin says.

Despite his comparatively late entry, Oracle’s Ellison claims his firm’s role as a leading supplier of back-end database software puts it in an ideal position to offer e-commerce software such as sales automation as part of a total package of solutions.

But Keith Raffel, UpShot’s chief executive officer, says there is already evidence that isn’t working out that way.

Raffel has been taking on Oracle in Silicon Valley and elsewhere through a pointed advertising campaign that pokes fun at the high consulting fees Oracle often charges. Oracle’s take from consulting accounts for as much as 55% of the firm’s total revenue, according to an estimate by Robertson Stephens. Oracle’s consulting services are often required before an Oracle customer can get their systems up and running.

“We’re growing the number of [workers using Upshot’s software] by over 20% a month,” says Raffel, a veteran Silicon Valley insider who helped get the now-profitable Echelon Corp. {ELON} off the ground. The company’s customers pay $55 per user per month and can usually get their systems up and running within a few weeks.

UpShot has raised about $45 million in pre-initial public offering investments so far, with the backing coming from a technology who’s-who list that includes Echelon founder Ken Oshman, serial entrepreneur Tom Proulx of Intuit Inc.’s {INTU} Quicken fame, Compaq Computer Corp. {CPQ} kingpin Ben Rosen, as well as Intel Corp’s {INTC} venture-capital arm, Intel Capital. A future IPO is contemplated but not currently planned.

Raffel wouldn’t disclose the total number of current UpShot customers but acknowledges they now include Hewlett-Packard Co. {HWP} and Pfizer Inc. {PFE}. Many other UpShot customer testimonials can be found on the company’s Web site.

Oracle representatives didn’t respond to CNBC.com’s request for an interview prior to the deadline for this story.

“We chose UpShot because we had to get something up and running fast,” says Tom Hughes, Hewlett-Packard’s program manager for sales and marketing technology. Hughes says he and his staff evaluated competing products from Oracle, Siebel Systems, and others and says his ultimate decision was pretty clear-cut.

Both Oracle and Seibel Systems’ products, he says, “were too expensive and took too long to implement. It would have taken two years to get them working and I had more like two months.”

Hughes says he is fully satisfied with UpShot after two years as a customer. “They’re very good, and whenever we have an issue about something they take care of it right away,” he says.

Raffel says that Oracle’s claim that its success selling back-end databases will translate into success in the front-end selling e-business software doesn’t make much sense — at least, he says, not to sophisticated observers who understand the way newly evolving ASP businesses like his operate.

“Oracle’s claim is a mystery to me,” Raffel says. “No one cares what database is used. Under the ASP model we use, we run the database for the customer. That’s a major advantage for them. They don’t have to worry about having database administrators, IT professionals, or for that matter, servers. It also means that they can get up and running very fast. So customers are indifferent to what the back-end database is. It just doesn’t matter.”

Raffel says he isn’t worried that Oracle’s free offering will cut into his business. “There’s a well-known saying in Silicon Valley – ‘beware of geeks bearing gifts,’” he says. “When customers look at the total costs involved they come running to us.”

Bajarin says there is little doubt that Oracle is using its recently introduced competing free sales-force automation software to try to drive business to its services group. “The question,” he says, “is whether that will work.”

Read other articles by Hal Plotkin

List of Customer Relationship Management (CRM) Vendors

List of Customer Relationship Management (CRM) Vendors

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