Missing no opportunity to take a swipe at the competition, Oracle’s Senior VP of CRM On Demand Anthony Lye talked about Salesforce.com’s recent 40 minute service outage with InformationWeek’s Mary Hayes Weier.

In an interview with Weier, Lye discussed Oracle’s approach to CRM On Demand as opposed to Salesforce.com.  In particular, Lye brought up CRM On Demand’s “Pod” structure, wherein customers can either be in a single-tenant or multi-tenant datacenter.  Some customers get their own dedicated “pods”, while others share theirs with customers that share similar qualities (for example, all want maintenance to run on a particular day).

Lye positions this design as a competitive advantage over Salesforce.com, but to me this actually seems a like an extra cost for Oracle without much benefit to customers.  No single pod can be perfect and completely invulnerable to outages, and if I’m a customer of Oracle’s CRM SaaS, and my competitor is too, I’d be happy if both me and my competition was without CRM for a period of time, and not take a chance that my pod may be down while the competition’s is up and running.

In terms of the extra cost to Oracle, running multiple “pods”, all with potentially different releases of the CRM software, and different usage levels makes it difficult to manage the data center.  It seems like a lot of extra management cost.  If that management cost is passed on to the customer, it’s probably going to make them turn to a competitor who is running their datacenter more efficiently.  If Oracle eats the cost, they’re shaving off profit from a business which is already has notoriously slim profit margins.

Weier goes on to write:

But my sense is Oracle is going to be looking at any way it can to weaken Salesforce.com’s position of strength in the CRM SaaS market. SaaS may not be a highly profitable business model for software companies, but Ellison & team clearly want a piece of it

I believe this is absolutely true, and is what I wrote about earlier regarding Larry Ellison’s recent comments on cloud computing.  SaaS is just in its infancy.  As SaaS matures, customers and enterprise software companies will reap significant rewards.  Ellison appears to be readying Oracle to claim Salesforce.com as its prize in case their own CRM On Demand business fails to gain traction.

Filed under: Cloud Computing, Enterprise Web, SaaS