Apps Vendors Predict Better Times AheadApps Vendors Predict Better Times Ahead

Big applications vendors expect to buck bleak IT spending projections for 2003 by getting more sales from existing customers and grabbing business from smaller competitors.

Oracle, for instance, is optimistic about its applications business, which has been hit hard by the economy and quality problems. Oracle 11i apps had a rap for being low quality, and its sales force, used to selling databases, wasn't skilled at dealing with non-IT business execs. That's changed with a dedicated apps sales team and improved outsourcing services, CFO Jeff Henley says. Oracle is expecting growth in this business later this year, having seen apps revenue dip as much as $100 million quarter over quarter in the past year. "The worst is over. We can see growth over the coming year," Henley says.

It's all relative, says Jim Shepherd, a senior VP at AMR Research: Vendors are comparing future sales with sales in a down economy, so it's easier to show percentage improvements. But Oracle has fixed many 11i bugs, added functionality, and improved its sales and marketing. It also has done better matching applications functionalities and strategies to those of its database and tools businesses, Shepherd says. For new apps business, Oracle will look to its installed base, like athletic footwear maker Fila USA, a database and tools customer for the past six years that recently decided to replace PeopleSoft Inc. human-resources applications with Oracle's HR, Advanced Benefits, and Employee Self-Service modules to escape increasing maintenance costs. "This was our first real hard look" at Oracle's apps, says Jim Allenbaugh, Fila's senior database manager. "When we saw Oracle's features and functionality, the app made the decision for us."

Oracle isn't alone in benefiting from its existing customers, Shepherd says. "While Oracle will grow over the next quarter faster than the market as a whole, the same is probably going to be true for Oracle competitors, but I don't know that we'll see that for the smaller vendors," he says.

SAP, too, expects to get more business from existing relationships and will go after smaller competitors, the company said last week when it reported fourth-quarter net income of $508.9 million on $2.4 billion in revenue. Tighter operations are credited with boosting net income 49% compared with the same quarter a year ago; revenue slipped 2% compared with a year ago.