Update: Oracle brings SMB suite to North America

Oracle Corp. is finally bringing to the North American market its Oracle E-Business Suite Special Edition, a midmarket-aimed package of pre-installed, preconfigured software from its 11i suite of business applications.

Oracle has offered the bundle in parts of Europe and Asia since 2002, but plans to bring it to the U.S. market early this year were delayed as Oracle recruited partners to support the offering. The E-Business Suite Special Edition will be primarily sold through Oracle’s channel, with partners setting the price and handling implementation. Oracle said licenses for the suite will allow a minimum of 10 users and a maximum of 50.

Oracle will offer its financials, inventory, discrete manufacturing, order management, purchasing, telesales, teleservice, field sales and daily business intelligence applications in the bundle. The modules will be identical to those sold to enterprise customers through Oracle’s standard licensing arrangements, Oracle President Charles Phillips said on Monday during a conference call with press.

Oracle cast the new bundle as part of its expanding portfolio of software with midmarket-specific licensing terms. Oracle sells versions of its database and application server software labeled “standard edition one,” with lower price tags for organizations planning small deployments.

Oracle will stick with adjusting the licensing terms on its enterprise software to attract smaller buyers rather than introducing entirely new products, Phillips said, as rival SAP AG has done with the Business One line it picked up through acquisition. “Our strategy is to have one code base,” Phillips said.

Reseller Whitbread Technology Partners Inc. expects significant demand for the bundle: “The (small-and-midsize-business) market is anxiously looking for the ability to enter into a tier-one product,” President Joel D’Arcy said. “Unfortunately, many of them have tier-three pocketbooks.”

Stoneham, Massachusetts-based Whitbread deals exclusively with Oracle technology, and already does more than 80 percent of its business with companies in the New England area with annual revenue of less than $100 million. Oracle defines its target market for the E-Business Suite Special Edition as companies with annual revenue of up to $250 million.

The bundle’s real benefit is less the cost savings it offers than the more streamlined sales process, said Mike Feldman, managing partner at Dallas services firm Lucidity Consulting Group, a partner supporting the offering. Oracle’s enterprise sales processes, involving its own direct sales and demo teams as well as the partner’s, can overwhelm smaller companies, Feldman said. With the Special Edition, Oracle will allow partners to handle the entire sales and implementation cycle.

“We’ve always felt we could do more volume if we could have control over the entire process,” Feldman said.

Lucidity Consulting hasn’t lost sales in the past because of Oracle’s software pricing, which is generally perceived to be out of reach for smaller companies. “At the end of the day, Oracle has historically been able to provide the right discount,” Feldman said. Still, he expects customers could see some pricing reduction as resellers profit from the margin on selling the suite, rather than only on the value of the software implementation contract. Some of those savings could be passed on to customers, Feldman said.

“The problem is the perception about Oracle only being suitable for a larger client,” he said. “That has prevented us from getting sales at a lot of these smaller companies. It’s not so much that these new discounts are better than what we have historically done, it just finally getting that message to the market.”

The software still won’t come cheap: Customers can expect to spend close to six-figure sums on licensing and at least that much on deployment services. Oracle’s first U.S. Special Edition customer, lighting systems seller Amerlux LLC in Fairfield, New Jersey, will spend nearly $500,000 this year to get up and running, according to director of operations Matt Glass. The total includes licensing, services work from Oracle partner Core Services Corp., maintenance and application hosting by Oracle.

Amerlux is replacing a hodgepodge of stand-alone systems by licensing the Special Edition suite for 48 users. Amerlux also looked at Microsoft Corp.’s Navision, Great Plains and Axapta software, along with software from Epicor Software Corp. and from SAP’s midmarket line, Glass said. None of the other offerings were as compelling as Oracle’s, particularly because of Oracle’s ability to expand to the full enterprise E-Business Suite as Amerlux grows, Glass said. With SAP in particular, the idea of doing a rip-and-replace if Amerlux outgrew the Business One software wasn’t attractive, he said.

“With Oracle, you can kind of crawl, then walk, and run later,” Glass said. “It wasn’t quite a slam-dunk, but it was pretty close.”

Amerlux is already close to the 50-user cap on the Special Edition, but Glass said he’s not worried because he doesn’t expect to expand the license for several years, and when Amerlux does, its contract specifies that it will pay the higher per-user licensing fees only for those users above the cap — rather than suddenly stepping up to paying the higher rate for all users.

Down the road, he also anticipates expending beyond the modules offered in the Special Edition bundle. “We didn’t get some of the sexier stuff like iStore (for e-commerce),” Glass said. “We’ll probably blow that out in two to three years.”

In Europe and Asia, where Oracle has sold the Special Edition for several years, the company has built a network of 150 resellers and a referable base of customers, according to Oracle’s Phillips.

‘We’ve had time to learn what works, to refine it and adjust it,” Phillips said. “That took some time longer than we would have liked, but it happened.”