Larry Ellison: There's No Money in SaaS - SaaS Week

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September 24, 2007
Larry Ellison: There's No Money in SaaS

In InformationWeek's CIOs Uncensored blog, Mary Hayes Weier reported that Larry Ellison has no interest in the SaaS trend because "there's no money to be made there." Because SaaS is so much cheaper than on-premise software as a rule, Ellison wants no part of the lower consulting, integration, and licensing fees until someone figures out how to make more money out of it. Instead, Oracle wants to keep targeting larger companies with traditional software delivery. eWeek also had a longer article about Ellison's comments.

Is Ellison on the wrong track? He definitely has a point, insofar as SaaS does have a potential to cannibalize vendors' profits when customers choose it over more expensive on-premise software. But if Oracle's competitors, such as SAP with its new Business ByDesign offering, decide to offer SaaS, then Oracle may risk losing potential business by not jumping on the bandwagon and giving SaaS-wanting customers what they want.

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» On SaaS, On-Premise Software, and Economics from
[...] Furthermore, it’s money up-front, not just for the license but whatever implementation hassles your consultants plan to wring out of you. There’s a reason Larry Ellison doesn’t like the low-profit SaaS business, and that in and by itself is a good sign as far a cost-conscious small and midsize businesses should be concerned. [...]----- -------- [Read More]

Tracked on September 27, 2007 12:51 AM

Comments

I take it LE is referring to Oracle's opportunities, rather than any issue with SaaS as a model. Isn't he an investor in Netsuite?

Posted by: Jim Donovan at September 24, 2007 07:32 PM | Permalink

Maybe he should pick up a copy of "the long tail"? :-)

There's a lot of companies, organisations and governmental institutions that cannot afford Oracle's on-premise, high-end solutions. SaaS is just as much about opening up new markets as it is to disrupt existing profits and markets.

Posted by: John Arthur Berg at September 25, 2007 04:27 PM | Permalink

Larry is wise. SAP invested between $400 - $600 million dollars across 1000+ people over 5 years to create their new product. A software company can't take a product suite architected for a single customer, host it, and magically become a successful SaaS vendor.

Based on my extensive SaaS ERP experience, smaller companies, by lack of experience, consume the same - or more - support costs as larger companies. So, the larger the targeted functionality, the more difficult it is for a software vendor to recoup their investment (if they ever do).

The software industry is being turned upside-down by a number of factors. Caution on all sides (software vendors, channel partners, consultants, and especially customers) is warranted.

Posted by: JM at October 2, 2007 12:09 AM | Permalink