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FROM THE EDITOR: Global CIO: Will Oracle Or SAP Blink First On 22% Maintenance Fees?
Oracle and SAP seem to be nearing a point of having to make some hard choices about whether to consider modifying their one-size-fits-all 22% annual fees for upgrades and support. Wall Street will boil them in oil if they do because the 90% margins on those fees sure make overall earnings look good, but an even bigger risk could be that customers will begin putting the big guys on ice if they don't show some pricing flexibility in today's very different IT market.
Amid the prospects of fire and ice, let's take a look at three dramatically different scenarios for how this situation might play out, and then analyze the prospects for each (and for some extensive background and perspective on this topic, be sure to check out the "Recommended Reading" list at the bottom of this column):
1) SAP and Oracle stick to their guns. In this case, both SAP and Oracle conclude that since many customers keep signing up, they must not have a problem with the 22% fees. This could be true, but I think it's not—rather, with few alternatives at this time, big customers feel trapped because choosing to drop support altogether will likely be seen as unacceptable risk. Financial analysts proclaim the business model is superb, but customers sharpen their knives and look forward to the time they can be used.
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