Thursday, December 9, 2010

Ever Thought off Enterprise Software Maintenance Fees - Oracle vs. SAP

Lets differentiate


Oracle and SAP, along with most business application vendors, charge maintenance fees for use of their software. By tying these fees to software upgrades, vendors assert considerable pressure on customers to pay for annual support that, in general, covers basic issues such as legal updates, bug fixes, problem resolution, knowledge transfer and quality management to keep systems running properly.
While charging software maintenance fees is common practice among vendors, how vendors demonstrate the value of their maintenance programs and how they go about enticing customer participation in these programs differs dramatically. Oracle vs. SAP, for example, provides a study in contrast for how vendors treat their customers when it comes to software maintenance.
The Oracle Approach – Follow the Money
Oracle has historically charged a flat, annual fee of 22%-of-license cost for maintenance. Oracle aggressively leverages litigation and has been accused of employing anticompetitive tactics in its efforts to force its customers to pay annual maintenance fees and eliminate the option of markedly cheaper 3rd-party maintenance and support offerings.
Shortly after filing a lawsuit against SAP for the improper downloading of Oracle code by the 3rd-party support provider TomorrowNow (a now defunct SAP subsidiary), Oracle filed a lawsuit against 3rd-party support provider Rimini Street, who in turn has filed a countersuit against Oracle alleging anticompetitive behavior. Rimini Street is not alone in challenging the legality of Oracle’s heavy-handed tactics used to secure maintenance revenue from its customers.
In May of this year the Service Industry Association, a trade group representing IT service providers, requested that the U.S. Department of Justice block Oracle's new policy on customers using third-party support for Sun Microsystems gear. The SIA alleges that Oracle’s changes to the Sun maintenance policy are a flagrant attempt to block out 3rd-party providers and bully customers into buying support only from Oracle.
The rationale for Oracle’s assault on 3rd-party maintenance providers is straightforward enough. Oracle’s maintenance and support business rakes in about $16 billion annually, and Oracle has publicly claimed a 90% margin for its maintenance business. Oracle’s new maintenance policy for Sun equipment, if it stands, adds an additional $2.4 billion to the Oracle coffers.
What do Oracle customers think of Oracle’s maintenance fee? According to a recent survey conducted by Computer Economics, when it comes to the cost and quality of Oracle’s maintenance, 42% of Oracle customers are dissatisfied with the quality of Oracle maintenance and support and 58% are dissatisfied with the cost of Oracle’s maintenance and support.
It is clear that Oracle is prepared to do whatever it takes -- customers be damned -- to keep its rich maintenance revenue stream flowing.
The SAP Approach – Demonstrate Value
In stark contrast to Oracle’s litigation strategy and anticompetitive tactics designed to lock in customers and shore up its maintenance revenue, SAP’s approach to support and maintenance for its software centers on collaborating with its customers to identify, quantify and promote a clear understanding of the real-world business value of its maintenance program.
Prior to 2008, SAP offered its customers tiered support -- a 17% basic support package and a 22% premium package. In 2008, SAP announced a plan that would transition all of its customers to a new, beefed up Enterprise Support program by 2012 at a 22%-of-license cost.
In addition to basic maintenance, SAP’s Enterprise Support program includes 24/7 service level agreement; end-to-end support (including non-SAP network components); and support for implementing SAP ERP application enhancement packages (enhancement packages did away with costly, disruptive, large-scale upgrades).
In 2009, SAP and the SAP User Group Executive Network (SUGEN), a global federation of 12 key SAP user groups, announced they had identified and agreed upon a series of KPIs that would demonstrate the value of Enterprise Support. Understanding that more collaboration with customers was needed, and that effectively communicating these KPIs to its global customers would require more time, SAP postponed making a decision on the pricing for Enterprise Support.
In January of 2010, after working closely with its customers and in response to a challenging economy, SAP re-introduced a tiered support program and announced that it would keep pricing for its 2010 Enterprise Support package at 2009 levels.
For more background on SAP’s Enterprise Support program:
Posted by SAP at 10:50 PM

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