Archive for May, 2009

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Quips: How much industry experience do you want from your analysts?

Published on May 31, 2009 by R "Ray" Wang

Here’s the context…after a week at Forrester’s IT Forum in Las Vegas, clients kept coming back to us saying that in general it was refreshing seeing how much experience our analysts had and also how fun it was to meet the analysts in person. So on Friday May 28th, I posed the question, “Having an int conv w/a client on their expectations on analyst work experience. How much exp do you expect from your analyst?”  Now the going hypothesis was that experience would matter, but as you can imagine, there was quite a bit of private chatter along with the public tweets which you can see below:

Representative tweet stream from the question on analysts and work experience

In a quasi-scientific poll of 37 responses, the general arguments fell into to a few camps:

  • Vendors seek seasoned analysts they could put in front of their executives and clients with confidence (45.95% or 17/37). As one software vendor AR manager put it, “How can I put my C-level executives in front of a junior analyst who never worked in the industry and tell them that this person is evaluating you?”  Alain Breillat (@alain7), a director of product management at Nielsen reinforced this point by stating, “in my experience the truly useful analysts have deep experience working with the tools (3-5 yrs min) and 3-5 yrs observing industry”  Star analyst and guru Naomi Bloom (@InFullBloomUS) chimed in with, “To analyze current devs in their historical context & w the perspective of broad/deep industry knowledge takes at least 10 yrs exp.”
  • End users expect that the analysts bring seasoned expertise to the table (35.13% or 13/37). While there isn’t an expectation an analyst can wax technical about the party models and tables in the latest Oracle or SAP app schemas, there is an expectation that analysts can provide actionable advice.  Most expect this to be honed by years of experience.  One large customer told me at a client site when I first walked into the room, “Son, you look too young to know what the heck you are talking about.  I’m giving you 15 minutes”.  An hour later, he apologized but the point was well taken.  I probably should gray my hair and wear some glasses.
  • Vendors look for smart, bright analysts who haven’t been jaded and can take a fresh perspective (18.92% or 7/37). A few vendors commented that at times the world order of analysts needed to be broken.  Politely and professionaly epitomized by Dawn Crew (@dawncrew), a Solution Marketing Director at SAP focused on HCM, she raised the point that ” work experience 20 to 30 years ago is irrelevant anyways.  I want an analyst that can consume and digest volumes of info w/o bias”

The bottom line -industry analysts have to be able to call BS when there’s BS.

It’s all in the eye of the beholder what analyst best meets a stakeholder’s needs.  Josh Weinberg (@kitson) at CRM Magazine summarized the situation as, “Didn’t u *expect* vendor&end-user clients to want different qualities in their chosen analysts? The respective needs are different.More curious about different desires (a) by industry and (2) length of client engagement (how long they’ve been w/you).” Different strokes for different folks!  One would expect that industry experience probably helps, especially when a few vendors outright tell tall tales about their technology claims. However, this probably doesn’t preclude someone very bright from figuring it out over time.  But as a trusted adviser, one would expect industry analysts need to have the context to separate the marketing from the message and make a call.  Now nobody wants a jaded curmudgeon, so the solution – side with the gray hairs and their experience.  Also, encourage them to be open to new ideas as they come along.  Keep the faith! Once in awhile someone a bit younger may actually know what their talking about!

Your POV.

So let me ask you, what do you expect from your industry analysts?  Identify yourself as a vendor, end user, media professional, etc.  Please post here or send me a private email to rwang0 at gmail dot com.

Copyright © 2009 R Wang. All rights reserved.

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Quarterly Financial Tracker: Q1 CY 2009 Slowdown Impacts All Vendors, SaaS Still Experiencing Strong Double Digit Growth

Published on May 24, 2009 by R "Ray" Wang

Most software vendor license revenues took a beating this CY Q1 when compared to 2008.  SaaS vendors managed to post double digit gains while only a handful of on premise vendors eeked out a positive gain.  Major highlights in the 2009 Calendar Year Q1 include

  • Big losses in YoY license revenue for on premise vendors such as Manhattan Associates (-73.12%), QAD (-54.37%), Deltek (33.99%), CDC Software (33.77%), and SAP (32.80%) signal significant long term weakness in attracting new business.
  • Few winners in YoY license revenue for on premise vendors.  IFS (13.41%), Intuit Quick Books (5.23%), and Sungard (2.53%) showed positive traction amidst a morass of bad news.
  • On premise vendors stabilized maintenance revenues from major losses.  Some vendors including Epicor (49.25%), Deltek (26.09%), and IFS (20.25%) managed to show significant gains.
  • SaaS vendors cleaned house despite the challenging market.  Taleo (34.20%), Blackboard (26.25%), Concur (25.61%), Salesforce.com (23.14%), and NetSuite (21.83%), led the growth race in YoY total revenue.
  • Growth rates on a YoY basis have slowed for most SaaS vendors, though when factoring the economic forces, these gains reflect truly substantial success.
Software Insider Index® Q1 CY 2009 On Premise Vendors

Software Insider Index® Q1 CY 2009 On Premise Vendors

2009 Calendar Year Q1 SaaS Software Insider Index®

Software Insider Index® Q1 CY 2009 SaaS Vendors

The bottom line – SaaS goes mainstream in 2009 and on-premise vendors must offer hybrid deployment options

SaaS vendor growth continues to defy the ball and chain forces of the macro economy.  Though overall growth rates are less than the year before, the SaaS model gains favor with all sizes of enterprises and in all industries.   Rapid implementation, subscription pricing model, and constant innovation drive significant interest. This leaves on premise vendors in a precarious situation.  Without support for SaaS or other hybrid deployment options, expect customers to wall off their current vendors and pipe in new innovation around the edges with SaaS.

Your POV.

Do you find your vendor sales person becoming more aggressive with their sales tactics?  Have you held back on new purchases or upgrades?  Is this the year you go full out on SaaS? Feel free to post your comments here or send me an email at rwang0 at gmail dot com .

* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of February 25th, 2009.  Not responsible for currency flux.  Please read the quarterly filings yourself =)

Copyright © 2009 R Wang. All rights reserved.

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Wednesday’s Whispers: The Word On The Street – May 2009

Published on May 20, 2009 by R "Ray" Wang

PEOPLE WHISPERS: MOVES, PROMOTIONS, AND MILESTONES*

Congratulations to all!  Thanks for your emails and alerts.  If you’ve got a change or know of a promotion, keep dropping me a line!  If you need a referral, don’t hesitate to reach out to me via Linked In.

Bronwyn J. Allen became Director, Analyst Relations at Fujitsu America, Inc. in January 2009.  Bronwyn brings over 20 years of AR and marketing communications experience for professional services firms.

Scott Azzolina is now VP Marketing at Connectria, an IT outsourcing and hosting company.  Scott brings over 25 years of experience from roles at Primavera Systems, Gemplus(Axalto), PECO Energy Company, Unisys, Scott Paper, and NCR.

Jonathan Bennett became Sales Executive – West at Astadia, a SaaS professional services firm, in March 2009.  Bennett is a driving force in solutions selling in the enterprise software industry with SaaS pedigree as a Managing Director at EnablePath and Sr. Account Executive at Salesforce.com. Previous roles include Manager of presales at Pilot Software (now SAP), Manager of Professional Services (BSG) at E*TRADE Financial, Senior Technical Sales Consultant at Personify, Inc. and management Consultant at PricewaterhouseCoopers

Jim Bork named Senior Vice President of World Wide Sales for Epicor Software. Jim brings 16 years of sales and sales management experience including international sales for Epicor. Jim’s expertise includes go-to-market strategies and sales management experience.

Sean Cantelon is now Managing Director at O.C. Tanner.  Sean last served as a seasoned star sales professional focused on building relationships and delivering solutions to his clients for Forrester Research and Giga Research.  Other experiences include working as an Account Manager at MCI Systemhouse.

Stephane Carrez became Head of Planzone R&D at Augeo Software in November 2008. Stephane has held many technical roles at Solsoft, Sun Micrososystems, and Chorus Systems.

Chayson Comfort is now Business Development Executive at Statera, a professional services firm focused on business performance.  Chayson served as as star sales professional and National Account Executive at Forrester Research. Chayson also worked at Verizon Information Services.

Pete Daffern became CEO at ClairMail, Inc in January 2009.  As CEO of Pursima, he led the successful acquisition by D&B in October 2007.  Pete brings executive experiences as President of AIM technology, VP of Business Development for Vitria, and General Manager of Seagate EMEA.

Mike Frichol became Principal at Ingistics, LLC in February 2009.  Mike brings a wealth of executive level industry marketing and product marketing experiences from Infor, Microsoft Business Solutions, ESI, and Dun & Bradstreet Software.

Jason Gatoff in March 2009 became Director of Marketing and Strategic Alliances at M-Factor, Inc. a profit and revenue optimization software firm.  Jason previously served as Program Director and Peer Forum advisor for AMR Research’s SAP clients.  Other marketing roles include work in Analyst Relations and Corporate Marketing for PeopleSoft and i2 Technologies.  Jason also served as a Client Relationship Manager at Forrester Research.

Rob Howes is now Assistant Director of Admissions / International Recruitment at DeVry University. Rob served as an Account Manager for Federal Government at Forrester Research.  Previous higher education experience include roles at CDI College.

Alp Hug became President & CEO of Alpland in February 2009.  Alp was formerly the Senior Vice President at Open Text for ECM Suite Technology.  He came to OpenText via the Hummingbird acquisition where he was the VP for Strategic Business Development.  Alp served other high tech executive roles at Delano Technology and TOR Computerized Systems.

Narayan Iyer is now Director at Cognizant Technology Solutions. Prior to his new role, he was the head of banking, financial services & insurance sales in India for Tata Consulting Services and had served various roles there for 5 years.

Charlotte Marchand is now Directrice Commerciale Adjointe at Neteven.  Charlotte served sales roles at Forrester in Australia and France.

Suhail Maqsood became Board Member – Projects SIG at Oracle Applications Users Group in February 2009

Tamara Mendelsohn became Community and Marketing Manager at Eventbrite in January 2009.  Tamara was Forrester’s star analyst in eCommerce.  She’s currently finishing her last year of her MBA at The Sloan School of Management (MIT).

Doug Merritt was promoted to EVP & GM Premier Customer Network at SAP in January 2009.  Doug also serves as the President of SAP Laps and is a Corporate Officer for SAP.  Senior executive roles throughout the tech industry include VP & GM of HCM at PeopleSoft, CEO and Founder of Icarian, and Sales Manager at BMC.

Clark Newby joins Workday as the CMO and Vice President of Marketing.  Clark joined Workday from Fortify where he served as a Vice President of Marketing.  Other marketing roles include Poly Serve, Mercury Interactive, Kintana, and Silicon Graphics.

Michael Pietrini named CFO and EVP of Finance and Administration at Epicor Software in April 2009. Pietrini’s 14 year tenure at Epicor includes roles in sales management, consulting, customer service, product development, marketing, and business development.  His responsibilities include sales operations, legal, human resources, IT and investor relations.

Eduardo Sanchez returns to MicroStrategy as the Executive Vice President for Strategic Development.  Sanchez previously was the EVP for Global Sales at Lawson, the COO of Cartesis, and a Corporate Vice President for World Wide Sales and Services and Vice President for International Operations at MicroStrategy

Brian Shelver became Senior Sales Engineer at Topaz Bridge in February 2009.  Brian played industry marketing and solutions selling roles at Kineticsware, Inc., Microsoft Business Solutions, and SAP America.

Shivani Shinde has been promoted to Principal Correspondent at Business Standard.  Shivani brings a rich set of journalism experience serving as a Senior Correspondent and Acting Bureau Chief of the Indian Express group and Senior Reporter at the Times of India.

Eric Steele joins Veritude, A Fidelity Investments Company in Business Development.  Steele was a star sales professional at Forrester focusing on building strong relationships and solution selling.  Other sales experiences include sales roles at Innovative.

Patric Timmermans now serves as a VP Marketing at KPA, LLC a boutique HR and Environmental Compliance professional services firm. Patrick’s previous roles include serving as a Senior Director Industry and Product Marketing at Infor, and various marketing roles at SSA Global and a a Principal Architect at Baan.

Joel Wecksell became Managing Director at The Skills Connection in January 2009.  Joel served as a Global Managing Vice President, Global Research Group Vice President and Vice President and Services Director for Business Applications at Gartner Group Inc.

Hannah Young was promoted to Senior Account Executive at Waggener Edstrom. Hannah has served many high tech sales professional positions including Account Executive at Forrester Research, Oracle Corporation, Cydcor, and Opinion Research Corporation International. Hannah focuses on building strong relationships and finding win-win solutions.

CORPORATE WHISPERS
Hearing from twitterati, software execs, and industry experts about:

  • High demand for third party maintenance option for Oracle Database, Oracle EBS, Infor, and SAP products.
  • SaaS acquisition being sought by IBM, Oracle, HP and SAP.
  • Hardware vendors such as Cisco and HP looking at adjuncts into the software space.
  • Telecom vendors such as AT&T, Bell Canada,  BT, and France Telecom looking at enterprise software plays to complement services and data center operations.
  • Micro-vertical vendors being drawn into more partnerships with Microsoft, IBM, SAP, and Oracle (MISO).
  • Partner opportunities with the large vendors at an all time high.  Lots of MDF and support unlike in past eras.

Got a scoop or something to share? Please post or send on to rwang0 at gmail dot com and we’ll keep your anonymity.

* Not responsible for any factual errors or omissions.  However, happy to correct any errors upon email receipt.

Copyright © 2009 R Wang. All rights reserved.

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Monday’s Musings: It’s The Relationship, Stupid (Part 5) – Living In Denial

Published on May 18, 2009 by R "Ray" Wang

Economic Downturn Challenges Enterprise Software Executives To Uphold The Sanctity Of The Vendor – Customer Relationships

Conventional wisdom would assume that in a challenging economy, strong relationships would be a key success factor to retaining business and mitigating loss of revenue.  Unfortunately, this does not appear to be the case for many companies, including vendors in enterprise software.  Blame it on the economy, fear of depending on their people, or plain greed, but a good number of executives have taken an approach that attempts to preserve shareholder value at the expense of their vendor – stakeholder relationships (i.e.employee, customer, and partner).  Now in their defense, these muckety mucks face dire times and hard decisions need to be made.  However, they are not in a unique situation and risk jeopardizing brand value, trust, and market credibility for short term gain. Let’s look at five common value destruction strategies:

Part 5: Living in denial by ignoring stakeholders

Successful relationships often span across key stakeholders that include partners, employees, suppliers, investors, and of course customers.  Lately, management teams at enterprise software vendors have chosen to placate investors over other key stakeholders.  As a short term strategy, boards will succeed in meeting the short term quarterly whims of investors.  But in the long run, these management teams risk alienating customers, partners, and employees – a slap in the face of a prime source of funding and innovation required to meet current and post recession challenges.  Conversations with over 47 stakeholders highlight some key findings including:

  • Forcing Kool-Aid down the throat of employees. “Our customers kept telling us that we were losing credibility given the rash of aggressive sales tactics over the past few years.  An increase in pricing or maintenance would be the straw that broke the camel’s back!  Most customers chose the lowered tiered offering.  There was really no additional value in the new offerings yet we kept pushing.  Many of us complained to our management teams but the decision was already made.  We must have lost 20% in deal flow in the past 2 quarters.  The resulting backlash could have been avoided.” Customer Support Technician for Global Support Services – Big 4 ISV
  • Glossing over channel partner concerns. “They kept telling us that customers had asked for this new SME product.  Extensive customer research had been incorporated.  And, any customer let alone employee who didn’t see the value in the new offering needed to be re-educated.  Despite being late to market, the product would sell itself because of our reputation and brand.  What they failed to understand was that country managers had already discounted the flagship enterprise product to a point where it was creating huge channle conflicts with sales of our SME product.  We warned them this would happen.  They kept ignoring our concerns over the past 12 months.   Amidst such confusion, our best and long time partners now are leaving for competitors.  For those that have stayed on, our biggest challenge has been trying to help them understand their role and input into our product strategy. “ Vice President of Software Partnerships – Global Systems Integrator
  • Ignoring customer requests.  “We need more choices in our user license options.  We used to have concurrent users, then we had named users, and now they want to move us to processor based licenses.  While they have been giving us conversion credits to the new models, we feel that each approach seems to benefit the vendor and not us the customers.  We have raised this issue with the management team each year.  They continue to ignore our requests.  After our recent acquisition, we now are in a position to leave the vendor next month.  It’s all lip service and they don’t value our input or relationship enough, even though we have spent $4M in 5 years.” – Global Director for Packaged Apps – APAC High-Tech Manufacturer

The bottom line – relationships matter despite the chaos around us.

Strong relationships are crucial for success, particularly in a difficult economy.  Vendors and customers need to find win-wins in order to succeed through this current down turn.  For vendors, they need to get a better grasp on what’s top of mind with key stakeholders.  Executives should walk the halls and directly solicit feedback from employees.  Management team members need to reach out directly to stakeholders and have honest conversations.  Too often, the fear of managing up prevents a company’s execs from hearing about the issues.  Instead, they think everything is working out fine despite how much middle management has quelled the groundswell of opinion.  Once these relationships can be reestablished, stakeholders will be there to assist by providing valuable feedback, seeking advice in solving business problems, and serving as references.  In the meantime, this trust needs to be reestablished.  Its truly the relationship that will pull you out of this downturn!

Your POV

Got a success story where your vendor has put a value creation strategy based on keeping good relationships? Or got a great story on the bone-headed thing your vendor or your employer has done to destroy value in the relationship!  Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

Copyright © 2009 R Wang. All rights reserved.

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News Analysis: Rimini Street Launches Third Party Maintenance for SAP

Published on May 16, 2009 by R "Ray" Wang

img00028

(Photo: Rimini Street movable billboard outside SAPPHIRE 09.   Courtesy of Rimini Street.  All rights reserved)

Almost one year after Rimini Street announced its intention to provide third party maintenance, on May 11th, 2009, the ground breaking support services provider announced that it had signed its first SAP clients and launched immediate availability of its support services for SAP products.  Rimini Street promises to deliver more than 50 percent cost savings in annual fees compared to SAP.  Conversations with 83 Sapphire 09 attendees confirm significant interest (79/83) in alternatives to SAP’s Enterprise Support offering, despite the SUGEN announcement.  Key elements of the software offering include:

  • Inclusion of older and current releases. Support for the SAP R/3 4.x, ECC 5.0, ECC 6.0, and BW 3.5 and earlier releases Named, local senior support engineers assigned to each client (no off-shoring of support calls)
    POV: In Rimini Streets original announcement, the vendor had intended to provide support for pre ECC products.  The move to support the full line will come as a pleasant surprise to many SAP customers who have upgraded to SAP ECC 5.0, SAP ECC 6.0, SAP NetWeaver 7.0,  and SAP NetWeaver 7.1 looking for leverage and options to SAP Enterprise Support.
  • Support through 2020 and beyond. Rimini Street has committed to providing tax, regulatory, and other updates for existing releases without any required upgrades.  This includes application fixes for serious issues and tax and regulatory updates as needed and flexible contract offerings.
    POV: Rimini Street has demonstrated success to date with acquire Oracle products to deliver such capabilities for existing customers.  Multinational customers will want to eavluate details about regulatory support especially in countries such as Brazil, Poland, and Russia.  Customers will want to undestand what Rimini Street defines as a serious issue.
  • Follow the sun coverage by a senior engineer. The announcement states 24×7 support coverage with 30-minute or less guaranteed response by a senior engineer.
    POV: A 30 minute response rate by a senior engineer may put Rimini Street in the top echelon of support capabilities.  Most vendors and support organizations promise response times of 60 minutes or less with no guarantee of whom may show up on the other line.
  • Comprehensive support with no additional fee. Support for client customizations, interoperability and performance at no additional fee
    POV: No tall order, this third party maintenance provider intends to handle the hairy task of supporting complex environments of spaghetti code and a patchwork of SAP integrations.  One would expect Rimini Street to also offer services to streamline environments in order to reduce their cost of support and increase application efficiency.

Conversations with Seth Ravin (CEO) and David Rowe (Senior Vice President of Global Marketing and Alliances) affirm Rimini Street’s
intentions to invest in this SAP practice.  Demand for third party maintenance and interest in working for a 3PM company appear to be strong.  Many long time SAP employees and support experts have reached out to both Rimini Street and the Software Insider
to seek employment positions.

The bottom line – include third party maintenance (3PM) options as part of apps strategy

Customers must carefully consider when to use third party maintenance as part of their long term apps strategy.   When effectively used, saivngs on maintenance fees can be applied to reinvestment and fund new innovation as opposed to feeding the beast!  Here’s a quick guide as to what scenarios to use third party maintenance:

  1. Stable apps environment. Often enterprises in this maintain as is scenario find few change requests from the business.  Internal support teams already deliver most fixes and changes.  A 50% or more cost savings to maintenance makes most sense here.
  2. Post upgrade savings. After completing an upgrade and achieving stability, customers can take the opportunity to enjoy new capabilities without having to pay full maintenance.  Customers take a risk here of not receiving any additional functionality and access to new enhancements.
  3. Redeployment “upgrade”. Clients who have made significant customizations and modifications requiring reimplementation for an upgrade will consider third party maintenance for both cost savings and negotiations leverage.  Moving to 3PM allows the client to fund the reimplementation or replacement while considering other vendor alternatives.

Third party maintenance may be appealing to most customers.  However, there are caveats to third party maintenance that include:

  1. Zero access to future upgrades. Movement to 3Pm means being cut-off from the vendor’s stream of innovation.  Customers seeking functionality in future SAP Enhancement Packages (EhP) should not consider third party maintenance at this time.  Upgrade to the latest requirements before considering 3PM.
  2. Potential back maintenance issue. Expect vendors like SAP to pressure customers about potential back maintenance.  Vendors customarily require customers to true up their maintenance fees should they come back.  However, recent amnesty programs by some vendors and the market pressure make this tactic less and less likely.  Moving to 3PM actually provides leverage to the customer.  Will SAP really threaten back maintenance payments when you are choosing among other vendors now that you are not beholden to them?
  3. Dependency on a third party. As with any other services contract, carefully consider the key SLA’s around metrics, performance, and unforeseen conditions.

Your POV.

Will you be calling Rimini Street in the next 3 months?  Do you believe that third party maintenance from SAP is feasible?  Does market place choice give you more leverage with SAP? Do you wonder why your system integrators do not offer third party maintenance?  Post your thoughts or send me a private email to rwang0 at gmail dot com.


img00027(Photo: Rimini Street movable billboard outside SAPPHIRE 09.   Courtesy of Rimini Street.  All rights reserved)

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Event Report: Sapphire 09 Day 1 – ASUG Pre Conference Perceptions

Published on May 12, 2009 by R "Ray" Wang

Outside the North/South Conourse at the Orange County Convention Center

(Photo: Sapphire 09 Outside the South Concourse of the Orange County Convention Center.  Copyright © 2009 R Wang. All rights reserved)

Despite the unusual heat wave in Orlando, FL, the SAP faithful and prospects gathered for ASUG’s Pre-Conference Seminars.  These hard core users came to learn more from the detailed educational sessions and to network with other users around the Americas.  Conversations with over 41 attendees and partners revealed a cautious sense of optimism amidst the global economic crisis.  Key questions on everyone’s minds:

  • Would ASUG take a more active and vocal role in future disputes or would they remain working in the background?
  • What did the KPI agreement with SUGEN and SAP mean regarding when maintenance would be increased.  Will the KPI’s be fair?
  • How to achieve lower operating costs for running SAP?
  • Was there more behind the developments and innovations of Business Suite 7?
  • What was in the future for Business by Design?
  • What Best Run Now packages would be of interest and relevance to me?
  • What Best Run Now packages could be implemented without buying new products?

The bottom line – SAP customers seek clarity in its solutions and future business practices

In this age of risk mitigation and a desire to reduce operating costs, customers will be asking SAP for its clarity in both business practices as well as product road map.  User groups will hopefully become more engaged in the process of providing feedback and partnership in the vendor’s success.  Stay tuned for more analysis from Day 2!

Your POV.

What do you hope to gain from Sapphire?  Any new learnings on your end?  Will SAP deliver on your expectations? Post your thoughts or send me a private email to rwang0 at gmail dot com.

Follow on Twitter at #Sapphire09

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News Analysis: Oracle Waives Fees On Extended Support Offerings

Published on May 4, 2009 by R "Ray" Wang

Oracle President Charles Phillips pleasantly surprised Oracle Applications User Group (OAUG) Collaborate 09 attendees this morning during his keynote with the decision to waive Extended Support fees for a number of product lines through 2010 and 2011. As customers and prospects face one of the worst global economic crises, proactive relief on support and maintenance fees could not come at a better time.  Summary details of the program can be found in Figure 1.

Figure 1. Oracle’s Revised Support Policies

Oracle's New Support Offerings

(Source: Oracle Corporation)

Proactive change in support offering creates a win-win

Oracle’s move to address the support issue may stem from a variety of reasons but the main focus centers around improving the vendor-client relationship for a few reasons:

  • Responding to the global economic crisis.  Oracle has taken the initiative in listening to customers, partners, and industry watchers about customer reactions to the escalating costs of software maintenance.  Oracle’s Applications Unlimited and Lifetime Support Programs have been successful in retaining acquired customers and have shown customers that acquisitions need not be slash and burn with minimal reinvestment.
  • Providing more time for customers to adopt Fusion Apps. With the slow down, Oracle may be anticipating slower upgrade rates.  While no clear date and product road map has been communicated to customers, removing the price pressure on extended support fees provides customers with some breathing room on upgrade timing.
  • Mitigating attention on high profit margins and its M&A strategy. After touting record profit margins near 50% and continuing its M&A strategy with the announcement to acquire Sun, customers have become concerned about the impact of less choice in the market.   This move may appease regulators and industry watchers and show that Oracle has some self regulating policies.

The bottom line – user groups should now determine the minimum R&D percentage of investment from revenues

Oracle continues to gain economies of scale with each acquisition.  The good news – Oracle has the capacity to reinvest $2.6B per year into R&D and the real dollar amount has increased from 1.9B in 2006.  While this is a large figure, the bigger and more important issue – what percentage of the maintenance revenues have been reinvested?  Here’s where we find a slight drop from 12.6% to about 11.6% in 2008.  Consequently, like SAP’s users and user groups, OAUG and the other Oracle users and user groups should begin to track the ratio of R&D dollars that tie back to the amount of maintenance revenue.   In fact, they may want to take a look at the SUGEN KPI’s and see if they are applicable to Oracle’s environment.  R&D spend from maintenance and the need for Third Party Support options will be the key ownership issues for the next 5 to 10 years.  In any case, the need for preserving and strengthening independent user groups will be one effective check and balance in the consolidating world of enterprise software.

Your POV

Do you feel Oracle made the right move?  What have your experiences been like with Applications Unlimited and Lifetime Support?  Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

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