The New "Vaporware"

If you can see something, and you can touch it, it's REAL
If you can see it, but you cannot touch it, it's VIRTUAL
If you cannot see it, but you can touch it, it's INVISIBLE
If you cannot see it or touch it, it's IN THE NEXT RELEASE

I heard this wisecrack on the software industry when client/server applications were being introduced in the early 90s. Lots of promises were being made in competitive deals about new architectures.

An IT executive recently commented "Oracle could not care what I thought about Fusion or if I ever migrated to it. All they want is for me to keep sending my 22% annual maintenance check".

And it clicked on me that we are seeing the new "vaporware". Maintenance is so much more profitable than new license sales that vendors will do anything or promise anything to keep (or acquire) customers on maintenance. When SAP casually says only half its customer base will have moved to its SOA by 2010 - frankly only 5% could move, and they would laugh all the way to the bank with the maintenance checks. They will happily discount new licenses by up to 90% to acquire new customers. 10% more discount and they would be "open source".

Which may also explain why Oracle may be considering a roll-up around open source.  BusinessWeek reports that Oracle is looking at JBoss, Zend and Sleepycat. Larry Ellison says ”We are moving aggressively into open source. We are embracing it. We are not going to fight this trend. We think if we're clever, we can make it work to our advantage."

The article says "JBoss' market share is difficult to nail down because only a small percentage of customers pay for support, and the vast majority download the software for free.

The sense is a company with Oracle's sales and global support staff could do a much better job turning those users into paying customers. Consider a Feb. 6 Merrill Lynch survey of tech-spending decision-makers: Six percent said they were planning to purchase more of JBoss' software going forward -- the same percentage that reported they would buy more of Oracle's competing middleware."

Customers pay a maintenance premium to an Oracle, SAP, IBM or Microsoft. Partly because they promise to deliver future, better releases.

As a customer you need to make an assessment. Will my vendor really, any time soon deliver a better next release. And if not, why am I paying 2-3 times each year for maintenance compared to third party maintenance options. Their bigger vendor SEC reports tell the numbers. They only invest  10 to 15% of every dollar in R&D and much of that goes to bug fixes of existing releases. A small percentage is going to the new releases they are promising.

The analogy is similar to BMW saying they will offer service plans to Hyundai customers. On surface looks like a deal. Clearly BMW has a better engineering image, but would you pay 2-3 times the price for each oil change? They certainly are not promising you the next model Hyundai. And if they are, they have learned the new “vaporware” game.

Comments

[jeff]

SAP is an investor in Zend.

[Tom Foydel]

This explains the enthusiasm of Oracle, SAP and Microsoft for 'on-demand' software. In their eyes it's taking annual license + annual maintenance 'on-demand'.