Oracle Losing Software Growth as Business Shifts to Cloud

Companies as varied as Bayer AG, Zynga Inc. and Hewlett- Packard Co. as well have opted in recent months for Salesforce over Oracle, evidence of shifting loyalties in the $113.8 billion business-applications market. Some corporations aiming to cut costs and find more flexible ways to run operations are turning to cloud providers like Salesforce and Workday Inc., shunning the kinds of pre-packaged applications made by Oracle that are installed on machines and carry multiyear service agreements.

Evidence of Oracle’s challenges may come later today, when the company releases fiscal third-quarter results. Oracle, based in Redwood City, California, is forecast to report that revenue rose 3 percent in the period that ended in February, according to analysts’ projections compiled by Bloomberg. That would follow a sales gain of 2.5 percent in the second quarter, which was the slowest rate of growth in two years.

Salesforce and Workday espouse an approach called "software as a service" that lets clients rent business applications instead of installing them on their own servers. This means companies that want to arm employees with new software don’t have to buy the underlying hardware, databases and the middleware that helps various programs work at the same time. Nor do they have to retain the phalanx of consultants often needed to keep the systems working so then.

There’s as well ample chance for Oracle and other large software makers to peel off clients of aging business applications like those made by Lawson Software Inc. and Sage Group Plc. Sensitive data can’t always be stored outside a company’s walls. What’s more, cloud computing companies’ software may in fact cost more than the sticker price because some companies need to hire consultants from Accenture Plc and Infosys Ltd. to integrate it with other programs they run.

Yet as companies swap older enterprise resource planning systems with newer cloud-computing software, SAP and Oracle have struggled to offer more Web-friendly applications. Oracle was years late to market with its Fusion applications, meant to knit at the same time its acquisitions of Siebel, PeopleSoft and other companies with a more modern user interface and software code.

Responding to the threat, Oracle is making forays into cloud computing. It agreed last month to buy Taleo Corp., a maker of online human resources software, for $1.9 billion. In January, Oracle acquired RightNow Technologies Inc. for $1.5 billion to gain online customer-service software. The company has as well announced a service called the Oracle Public Cloud to run Fusion applications in Oracle’s data centers.

Activision after all uses Oracle applications and databases to run its operations, financial planning and data analysis, Schmid said. Even so, the Santa Monica, California-based company chose Salesforce’s Service Cloud, Chatter social network and Radian6 marketing software to respond to gamers’ problems and analyze data from players of the "Call of Duty" war game to refine future versions.

Microsoft Corp. will finish work on Windows 8 this summer, setting the stage for personal computers and tablets with the . . .