Oracle Plans Utah Data Center To Support SaaS BusinessOracle Plans Utah Data Center To Support SaaS Business

Oracle is joining the ranks of software vendors building new data centers to support cloud computing.

The company will open what it describes as a global information technology center in West Jordan, Utah, by 2010, partly to support the company's growing on-demand software business.

Oracle plans to break ground on the 200,000-square-foot facility this summer and tags its initial investment at $285 million. Oracle issued a prepared statement today from president Safra Catz, who said the center will help support its on-demand business, plus research and development and customer service operations. Oracle wouldn't disclose further details about the center's operations, but its plan is consistent with Microsoft, Google, and other tech vendors building new data centers, typically in low-cost areas, to support growing online operations.

Oracle's on-demand software operation grossed $174 million in revenue in its fiscal quarter ended March 26, up 23% from the same quarter last year. Based on fairly consistent quarter-to-quarter growth rates over the past few years, Oracle On Demand is on track to gross around $700 million in annual revenue for the company's fiscal year ending in June, and Oracle cites 3.6 million users of its on-demand apps.

The company's on-demand business, however, is different from the multitenant, software-as-a-service, subscription-based model popularized by Salesforce.com. It's a hosting service in which Oracle manages the licensed applications of a specific customer, rather than a system in which many customers share a single instance of software, and are all upgraded at the same time, to allow for an across-the-board monthly subscription fee. Oracle On Demand represents about 3% of its revenue. By comparison, software licenses, updates, and support represented about 80% of the company's $5.35 billion in revenue in the last quarter.

Oracle said Utah offered incentives to build the center in that state, but did not disclose details of the incentive deal. The site is expected to house around 100 employees, with wages exceeding 200% of the Salt Lake County average wage.

Microsoft, meanwhile, is investing more than $1 billion for two new data centers near Chicago and Dublin, Ireland. These new investments add to the hundreds of millions of dollars Microsoft's already spending on server farms around the world to support customer e-mail, download software updates, and support photo sharing.