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Ellison on ‘on-demand’

Larry Ellison had some interesting thoughts on the on-demand model, especially intriguing as he retains his interest in NetSuite, the on-demand ERP provider. His ownership stake, which might appear to be a conflict since Oracle competes with NetSuite, is in some sort of blind trust.

Oracle’s CEO said the company’s on-demand business posted 25% growth year over year but seemed to agree with a questioner that it had been hovering at about 3% of overall revenue for some time.

“We’ve been in the on-demand business for almost a decade. We’re the second largest provider of sales automation software behind and Q4 was the first quarter we actually made money [at it],” he told analysts on the fourth quarter and fiscal year ’08 earnings call Wednesday night.

“We’re enthusiastic about it and we’ll get better at it.’

But… comes the big qualifier: “The entire on-demand industry has to get better at making money … doesn’t make much money and they’ve been doing it for ten years. No provider has done a good job at profitability. The last thing we want to do is have a very large business that is not very profitable and will drive our margins down.”

Indeed, the “p” word is the big gotcha in this cloud-computing model of web-delivered software services. Other legacy software players, most notably Microsoft, are wrestling with the issue of staying current with the trend without endangering its cash-cow software packages.

But in the Oracle context, you’ve got to wonder what Ellison thinks about NetSuite’s performance. In early June, NetSuite said it would post a bigger than expected 2008 loss. citing its acquisition of OpenAir, a professional services automation software maker. The cash deal was valued at $26 million.

Barbara Darrow can be reached at

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