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1/27/2009
05:25 PM
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Oracle's Charles Phillips: You Get What You Pay For

A team of InformationWeek editors sat down earlier this month with Oracle president Charles Phillips, a very busy man who has done very few press interviews. I really appreciated his time because I thought Phillips was the best person at Oracle to speak directly to some discontent I've been hearing about the software industry's maintenance fee structure.

A team of InformationWeek editors sat down earlier this month with Oracle president Charles Phillips, a very busy man who has done very few press interviews. I really appreciated his time because I thought Phillips was the best person at Oracle to speak directly to some discontent I've been hearing about the software industry's maintenance fee structure.At the InformationWeek 500 conference in Southern California last September, I asked a table of CIOs about their most pressing concerns regarding enterprise software. A top concern was maintenance: Some felt the rates were too high, that they didn't get enough for what they paid for, and there wasn't any flexibility in maintenance rates. Oracle was mentioned, but so was SAP and Microsoft. It's not surprising that the companies mentioned are the same one that CIOs spend most of their money with.

I presented these concerns to Phillips, and he made his case for Oracle's rigid maintenance structure, an annual fee that represents a non-negotiable 22% rate of the cost of a software license. Oracle needs to have a steady stream of income to fund product improvements, and even develop next-generation products not directly related to the products you're making maintenance payments on (such as the Fusion application suite). Oracle needs to attract highly talented developers and pay them well. It was unapologetic logic: If you want good products and a healthy vendor partner, you have to pay for it.

There are competing models that challenge the traditional license+maintenance approach, including software-as-a-service and open source. But the onus lies on the revolutionaries promoting those models to prove they have something that can not only challenge the status quo with cheaper prices and more flexibility, but result in healthy and profitable vendors that can attract talented developers, pay them well, and grow into sizeable operations that can support thousands of customers.

Buckle in for the ride, because it's going to be interesting to watch these forces go at it over the next few years and see how the software industry morphs as a result. In the meantime, you can read our Q&A with Phillips in this story, "10 Questions For Oracle President Charles Phillips," and our in-depth look at the state of software maintenance fees in this story, "Software Maintenance Fees: Time For This Model To Change?" Take a look, and let me know what you think in the comments space below or by e-mail, mhayes@techweb.com.

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