Battle of the E-Commerce Systems

Microsoft (Nasdaq: MSFT) and Oracle (Nasdaq: ORCL) find themselves butting heads in a number of high-tech arenas, but the software giants have both managed to carve out a sizable presence in the e-commerce sector.

The companies have so far taken different, but profitable routes to providing e-commerce products and services to clients, with Microsoft focusing in recent years on growing its niche in the small-business sector, while Oracle has concentrated mainly on mid-size business and the largest corporations for its growth.

But as both look to broaden their clientele, analysts said the two could clash with more frequency, battling to capture the growing number of mid-size commerce companies going online.

Differing Tactics

Gartner (NYSE: IT) research director Whit Andrews noted that Microsoft and Oracle have historically staked out distinctive approaches to the e-commerce sector.

"Oracle is seen as being more CRM-focused and doesn't have as much on the commerce side," Andrews told the E-Commerce Times. "Microsoft is considered one of the early e-commerce pioneers that wasn't able to live up to the early promise."

Both have honed their approaches over the years, however, to make e-commerce products and services pay off.

According to figures from Giga Information Group, Microsoft scored US$135 million in revenues from e-commerce products and client services in 2001, while Oracle made about $75 million in that market.

Both companies offer prepackaged as well as standalone applications that help businesses with Web-based hosting, e-mail, catalog, search, personalization, shopping cart and other functions.

Small Biz Pays Off

Gartner's Andrews said Microsoft has made notable e-commerce gains in recent months with its slate of bCentral and Commerce Server 2000 applications geared heavily to small businesses. This is in addition to its steady inroads within large corporations.

Andrews said that because of its recent focus, Microsoft has positioned itself as the most attractive provider for companies looking to set up a functioning e-commerce system for under $200,000, making most small-business systems possible for between $50,000 and $150,000.

"Microsoft has a broader range of applications related specifically to e-commerce," Andrews said, although he noted that Oracle programs tend to come with more functions that link commerce to customer relationship management features.

Experts said Oracle has traditionally focused its e-commerce efforts toward larger companies with more complex enterprise needs, and it has managed to keep up with Microsoft in the big-company arena.

"With companies above 1,000 employees, they're pretty much neck and neck," said Andrews.

Aiming at the Big Game

Giga e-business strategy analyst Andrew Bartels said Oracle has tended to target its services toward companies making between $50 million and $1 billion in annual revenues. That market has proven lucrative because once large enterprises begin using Oracle products, they tend to stick with them in the long term when upgrading or adding services.

But a slowing economy has prompted Oracle to look down-market for new growth.

"Oracle is trying to move to the mid-sized businesses a bit," Bartels told the E-Commerce Times, noting the company is now marketing its services to the top 20,000 global companies.

Bartels said Microsoft's push for small businesses -- which number in the millions globally -- could pay off but also poses big challenges. Many small businesses, especially brick-and-mortar establishments that thrive on walk-in traffic, are harder to convince of the need for Web commerce capabilities.

"Very few of the small companies really have the need for doing things online," the analyst said.

The Middle Game

He noted, however, that the mid-size sector is "really underserved," and he expects the software titans to duke it out in the next few years over new international business, as well as in the government and retail sectors.

While he expects Oracle to retain its long-term focus on larger companies, Yankee Group research director Michael Speyer told the E-Commerce Times there are signs Oracle is looking to confront Microsoft on the mid-size business battleground.

For example, Oracle is offering a hosting service called NetLedger that is designed to serve the accounting needs of mid-size businesses, including e-commerce firms. This follows moves by Microsoft to get into the middle-range game with the acquisition of companies such as Great Plains, a mainstay in accounting software products for small- and mid-size companies.

Many More Players

Experts emphasize, however, that Microsoft and Oracle are by no means the only combatants. Giga's Bartels noted that IBM (NYSE: IBM) posted $95 million in revenues during 2001 for commerce-related services to its global clients, although he added that IBM's focus is more on infrastructure and Web platform services than specific e-commerce applications.

Bartels said big splashes are being made by companies that specialize in commerce and enterprise products -- BroadVisionfor example, made $105 million from e-commerce offerings last year, and ATG (Nasdaq: ARTG) took in $76 million.

The Yankee Group's Speyer said the software giants are also competing with companies offering e-commerce features in their successful CRM products, including Siebel Systems and PeopleSoft.