Oracle overtakes EMEA app server market

Oracle Corp. elbowed rival Sun Microsystems Inc. out of third place in the application server market in terms of revenue in the Europe, Middle East and Africa (EMEA) region last year, the company said Wednesday. Research firm IDC confirmed the statement.

Oracle credits its success on aggressive marketing and pricing for its 9i Application Server, which has generated significant growth in the product’s customer base in the past 12 months.

“Two years ago we had virtually no customers for this product (application server) in EMEA,” said Rene Bonvanie, vice president of worldwide 9i marketing for the Redwood Shores, California, software vendor, in an interview.

Oracle doubled its EMEA customer base for the 9i Application Server over the last 12 months as of the end of April, Steve Walker, an Oracle spokesman said. The 9i Application Server was launched late 2000. Application server software sits between and supports, as a sort of central hub, Web servers, back-end applications and database servers.

Over 5,700 organizations in the EMEA region now use Oracle’s application server software, according to Bonvanie. Licensing and maintenance revenue generated in 2001 made the product the third-largest player in this market, he said.

Rob Hailstone, research director at IDC, confirmed that Oracle passed by Sun in EMEA, but said that Oracle is still trailing IBM Corp. and BEA Systems Inc.

“Essentially, Oracle is correct in what they are saying. Our numbers say they overtook Sun (in EMEA) in calendar year 2001. However, there is still quite a large gap between IBM and BEA at the top and Oracle and Sun underneath that,” said Hailstone. He declined to give further details. IDC’s year 2001 report is due in early June, he said.

Giga Information Group Inc. finished its worldwide 2001 application server report in late March. It said BEA and IBM led the market, each with a 34 percent share of the market in terms of revenue; Sun Microsystems Inc. took third place with a 7 percent share of the market, while Oracle had a 6 percent share.

Oracle has a three part strategy to win 9i Application Server customers; charging 70 percent less for its products than what rivals IBM and BEA charge for theirs, pushing the product to application makers such as Adobe Systems Inc., and targeting customers that use Oracle database products, but run BEA’s WebLogic application server, said Bonvanie.

“Over 70 percent of BEA revenue comes from Oracle database customers. That is a market we are going after,” he said.

BEA and IBM question Oracle’s EMEA customer numbers.

“I am amazed about the number of customers Oracle claims to have in the region. Oracle has certainly become more visible in terms of marketing efforts, but when it comes to sales wins, I haven’t seen that. We don’t face Oracle in competitive situations, the vendor we encounter is IBM,” said Marko Saarinen, EMEA director of product management for BEA.

IBM said Oracle is no match for its WebSphere in Europe.

“In the application server space, today’s customer requirement is about total integration of technology assets. Whilst WebSphere has established itself in these terms, we don’t find Oracle stepping up to the plate in Europe,” said a spokesman for IBM in Europe.

BEA’s Saarinen suggested that Oracle might be going for cheap market share, catering to customers that need the application server only for short term projects. Also, Oracle might sell its product as a backup to customers that don’t want to depend on one vendor, Saarinen said.

IDC’s Hailstone agreed, stating that the high customer number Oracle is citing shows that “IBM and BEA are taking the majority of the larger corporate deals, while Oracle is being successful at shipping application servers to their existing database customers who want to run a Java environment.”

“Oracle’s applications server appeals to the market that does not need such a heavy duty environment,” said Hailstone.

That is at least true for one Oracle customer, BAE Systems PLC, of Farnborough, England, a maker of vehicles for the world’s armed forces that employs about 120,000 people. The company bought the 9i Application Server to ease work on a ten year contract to build six navy destroyers for the Royal Navy in the U.K.

“It is a major program currently involving eight separate companies within the U.K. and about 750 staff collaboratively involved in the design and building of the ships. Because of the diverse nature we needed something to allow us to work together,” said Ian Haddleton, integrated systems and solutions manager at BAE Systems. “We already used Oracle databases and used Oracle in other parts of our company. So it just seemed ideal.”

Oracle’s discount practices might soon come to an end, predicts Charles Homs, a senior analyst at Forrester Research BV in Amsterdam. It might “potentially allow them to push BEA out of the market,” but pressure from Oracle’s shareholders is mounting.

“One of the main reasons for Oracle’s recent revenue drop is its heavy discounting. So I am not surprised to see them gaining market share and that they claim to be cheaper. However, Larry Ellison (Oracle’s chief executive) is increasingly under pressure to improve the performance of Oracle,” Homs said.