Oracle's expectations of improving revenues by boosting its hosted services business has met with little enthusiasm on Wall Street.
In a briefing to analysts on Thursday, Oracle said that it expects to grow its hosted ebusiness, database and application server software to generate $1bn in additional annual services revenue by 2006.
But the goal met with a muted response from analysts. "The opportunity is attractive but market adoption is still rather iffy in our view," said Rick Sherland of Goldman Sachs.
He explained that Oracle's hosted offerings could help the company to compete in the mid-sized market, but that larger companies are likely to be more resistant to handing over application hosting.
The offering gives software customers the option of having Oracle provide the hardware as well as set up and maintain the software.
In return, the company charges an additional three to five per cent per month on top of software licensing fees.
Since it launched the option two years ago, Oracle claims to have signed around 200 out of its 12,000 ebusiness application customers to host one or more of the accounting, human resources, manufacturing or other software components.
Although this is up from 10 last year, the company believes that the business can be substantially improved.
The slow uptake so far is not purely the fault of Oracle, according to analysts. "Despite some early investor enthusiasm, applications hosting has not gained significant traction in the broader software industry," said Sherland.
According to Oracle chief financial officer Jeff Healy the company has a goal of converting 25 per cent of its applications customers to the service in the next five years.
But while there is a new emphasis on its hosting business, Oracle is doing little to change its standing offer.
It says it will introduce hosting services for its database and application server products next month, but this has been offered unofficially for the last year.
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