Is There A Problem With Oracle And SAP Maintenance Costs? - InformationWeek

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IT Leadership // CIO Insights & Innovation
Commentary
9/19/2008
11:46 AM
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Is There A Problem With Oracle And SAP Maintenance Costs?

Oracle announced impressive first-quarter earnings yesterday, thanks in part to its highly profitable software maintenance business. At the same time, some complaints have arisen recently from both the Oracle and SAP customer camps about maintenance costs. While enterprise software vendors have to keep shareholders happy, my hope is they're listening to customers, too.

Oracle announced impressive first-quarter earnings yesterday, thanks in part to its highly profitable software maintenance business. At the same time, some complaints have arisen recently from both the Oracle and SAP customer camps about maintenance costs. While enterprise software vendors have to keep shareholders happy, my hope is they're listening to customers, too.Just this week, two CIOs I was chatting with at a conference launched into a discussion about Oracle maintenance costs. One was having a problem with Oracle's Siebel CRM that Oracle's regular maintenance folks couldn't fix, so the CIO was referred to Oracle's professional services organization, which would charge fees on top of the maintenance contract. The CIO feels that Oracle should solve the problem under the prenegotiated contract.

The other CIO listening to this story said he just went through a nearly identical experience with Oracle. Both CIOs have some level of debate going on with Oracle as to whether their IT shops had caused the problems, or it originated with the Oracle product (a not uncommon debate in the world of enterprise software). Both are now looking at lower-cost, third-party support providers, including Rimini Street. At its Web site, Oracle warns against third-party support.

In Oracle's earnings call yesterday, CEO Larry Ellison said maintenance makes up half of the company's sales. "The highest margin portion of our business is also the largest portion of our business," Ellison said.

Some SAP customers, meanwhile, have complained about the vendor's plans to increase software maintenance fees next year. The protest level prompted its user group, ASUG, to host panel discussions on the topic at SAP user events in Nashville and Dallas this fall, and SAP is hosting ongoing Webinars on the fee increase. These efforts are intended to educate customers on what more they'll get as a result of the fee structure, and so far, SAP seems to be sticking firm to its plans.

SAP also is doing fairly well despite the economy and anticipates revenue growth of nearly 30% this year.

There's always going to be that tug-of-war on costs between vendors and customers; that's the nature of business. CIOs also recognize that healthy, profitable vendors are a good thing, allowing vendors to invest in product and service innovations, attract the best talent, and stick around for the long haul.

But the economy stinks right now, and many CIOs are having their budgets pinched like never before. Rising or unanticipated maintenance costs add to the stress level.

Is this vendor-customer business as usual, or are there real problems out there in regard to Oracle and/or SAP maintenance costs? Would love to hear your thoughtful comments on this topic in the space provided below.

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