IBM vs. Oracle: It Could Get Bloody

Ask Oracle Corp. (ORCL ) CEO Lawrence J. Ellison what keeps him up at night, and the answer might surprise you. It's not his longtime nemesis, Microsoft Corp. (MSFT ) It's not up-and-comer Siebel Systems Inc. (SEBL ) It's IBM (IBM ), the awakening tech giant that is vying for the No. 1 spot in the corporate-software world. "He has stopped with that `Microsoft is the devil' stuff," says Steve Mills, IBM's software head. "He has moved on to us."

With good reason. Whoever wins in this face-off will grab the lion's share of the $50 billion corporate-software market for years. For every Oracle product, IBM has a counterpunch: Databases, applications, and e-business foundation software. At the same time, the companies' philosophies are strikingly different. Oracle's strategy is to offer customers a complete and tightly integrated package of software--everything a company needs to manage its financials, manufacturing, sales force, logistics, e-commerce, and suppliers. In contrast, IBM Chairman and CEO Louis V. Gerstner Jr. is backing a "best-of-breed" approach in which it stitches together a quilt of business software from various companies, including itself.