Oracle’s Ellison Takes Shots at Salesforce.com: Competitive Vitriol or Acquisition Foreplay?

If you’re the CEO of a business software company, you know you’ve finally arrived when Oracle CEO Larry Ellison mentions you or your company to the press or during a quarterly conference call with industry analysts.

You earn even greater amounts of fame if Ellison’s remarks are derisive in their nature. The more often your name is repeated, the more it appears Ellison actually despises you or your company’s business model. Or, he may be secretly keen on acquiring your company. (In Oracle parlance, the latter strategy is called “shutting off the oxygen.”)

SAP has been Ellison’s favorite target of late, especially as the battle over the remnants of SAP’s TomorrowNow rages on.

The SaaS CRM-maker Salesforce.com now sits firmly in Ellison’s cross hairs. Its CEO, Marc Benioff, is no stranger to the media spotlight (having upended a large chunk of the CRM market when he forged the company) or Ellison’s intense gaze (Ellison was, at one time, Benioff’s boss).

“We signed our largest on-demand sales-force automation contract this quarter,” proclaimed Ellison, in announcing Oracle’s mixed second-quarter FY 2009 results, in December 2008. “This was just one of several recent wins over Salesforce.com.” Oracle execs claimed that the unnamed customer had been using Salesforce.com before ditching it for Oracle’s CRM On Demand product.

During the conference call with analysts, Ellison noted that “This quarter was conspicuous in a series of competitive wins against Salesforce.com.” In fact, Oracle execs made eight “Salesforce.com” mentions during the conference call. Ellison also added that acquisitions weren’t out of the question, even in this environment. Oracle’s rumored acquisition of Salesforce.com is almost as old as the Internet itself.

For the record, Oracle has 5,000 customers using its On Demand product. Salesforce.com has nearly 52,000.

Ellison’s frequent and growing Salesforce.com commentary is an important validation of SaaS and an indication of just how much on-demand software-delivery models have matured (even though there are occassional hiccups). It also goes to show how much Oracle, SAP and other traditional on-premise vendors are worried about SaaS eating their lunch. Oracle and SAP have made it no secret that they are hard charging after the SMB customer segment—and SaaS apps are one way in which they are doing it.

This is an important battle to watch, not only for the entertaining war of words but also because the more companies (especially big companies, like General Electric) that embrace SaaS options, the more pressure gets applied to the traditional on-premise software model.

Like his former boss, Benioff isn’t afraid to espouse his software industry views. At the Web 2.0 Summit in San Francisco late last year, Benioff tried to write an obituary for the traditional approach to on-premise enterprise software. SaaS, Benioff said, couldn’t even be compared to “mature, dying models like Oracle and SAP, which [are] maybe already dead.”

On some level, that’s got to make Ellison just a little bit proud of his former protégé.