Eye on Oracle

Oct 29 2008   8:31AM GMT

Web 2.0 could take a big hit from down economy

Shayna Garlick Shayna Garlick Profile: Shayna Garlick

Oracle has certainly been doing its part in keeping up with the Web 2.0 craze.

Last year the company released WebCenter Suite, a comprehensive set of collaboration software, including Wikis, instant messaging, RSS feeds, portals, content management and many other Web 2.0 features and services. WebCenter will be the go-to portal in Oracle’s post-BEA middleware lineup, and Fusion Middleware 11g — expected to be released in the next six to 12 months – will include a dose of Enterprise 2.0

But despite Oracle’s efforts, are they doomed for Web 2.0 failure?

One Forrester Research analyst thinks it’s possible. Oliver Young says that although sales are booming right now, Web 2.0 applications (with the exception of mashups) will soon take a hit from price decreases of more than 50%.  

As explained in this article, Young gives a number of reasons why pricing — “one of the few aspects left to compete with” — is going to fall. In addition to “cutthroat competition,” deal sizes for wikis, widgets, blogging software, social networking and other Enterprise 2.0 services will be affected by the following:

  • Commoditization: Companies will have to get creative if they want to stay competitive. “For the most part, a blog from one vendor is no better than a blog from another, eroding differentiation and price premiums,” Forrester says in its report.
  • Bundling: The majority of companies are offering enterprise Web 2.0 suites, creating “a homogenous set of competitors.”
  • Subsumption: This tactic — which “brings Web 2.0 technology to millions of users at little to no cost” — is convenient for the big corporations like Oracle and its competitors. These companies can easily add Web 2.0 apps to their existing software packages with not much extra costs for the user.

EWeek blogger Clint Boulton also offered a different perspective:

“There is another reason deal sizes will shrink that Young doesn’t mention,” Boulton says in this blog post. “The current weak economy is reeling from the downgrades in technology stocks in the last two weeks, and this will help curb a lot of the spending on Web 2.0 productivity and collaboration software sales.”

So while this is bad news for Oracle, lower costs are good news for customers…right?

Maybe not. Young says that a company’s loss in license revenue could easily result in less innovative products without the time and money to improve them.

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