I have said plenty in past about the empty calories that software maintenance spend represents - here, here, here. So, Vinnie
Mirchandani Maintenance goes to a conference of a vendor which has made a career acquiring maintenance annuities and has nothing to say about maintenance?
Here are three perspectives from Oracle OpenWorld:
1) From Charles Phillips, President
The EIs had 45 minutes with Charles, and Jeff Nolan asked questions that were being Twitter-ed to him, and I moderated to ensure the EIs present got to ask at least one question each. So, as a consequence, I just smiled when Charles made the statements below. I am including points I would have made if I had hogged the 45 minutes
"Customers see the value of having a guy who owns the IP providing the support" - you are correct Charles, but customers also like choices. Like I say just because you buy a Porsche does not mean you go back to its dealers for every service. You are justifiably proud your services ecosystem has blossomed in the last few years. But while you let them do far more complex implementations around your product, you don't think others can support your acquired products? Firms like Rimini have shown they can deliver regulatory updates BEFORE Oracle can at much lower cost.
"They (TomorrowNow) can’t update the IP–the bug fixes and patches don’t work. It turns out they were stealing" Realize the matter with TomorrowNow is under litigation but is not the word "stealing" a bit provocative? With the thousands of software and services alliances Oracle has can it say unequivocally one of its employees has not used documentation - or other IP - from any of its partners? Also, many of Oracle products are licensed with source code. Which means customers or their proxies could legally maintain it even after they sever relationship with Oracle.
"Once past 2 1/2 years, we could make more money on software-as-a-service than on perpetual licenses and maintenance" Charles, I know you said that because you think you are reasonably priced today. The reality is many customers pay more per month per user to Oracle for maintenance on applications and database than they would salesforce.com or NetSuite for maintenance and license and hosting and database administration and application support and upgrades and and and.... You would need to rebook Moscone Center to handle all the customers who would line up if you priced PeopleSoft or Siebel SaaS at $ 60 to 100 (depending on scale) a user a month for all that
2) Input from third party providers
I went to see the execs at Rimini at a hotel near the OOW event. Business is good, with plenty of interest from non-profits under budgetary pressure and more recently financial services firms hurting from the sub-prime meltdown. Also, they said they were getting a number of referrals from industry analyst firms when clients ask them for alternative support scenarios. Another provider which does not publicize its third party maintenance offering but does it for clients on a one-by-one basis said even companies in healthy industries are signing up. If they have no plans to upgrade to Fusion or within their Oracle, PeopleSoft, Siebel etc family tracks (in line with Oracle's Application Unlimited vision) why pay Oracle so much more for maintenance?
3) Comments by Jesper Andersen, SVP, Application Strategy
In a session with the press, Jesper was talking about upgrades to the latest application releases. He mentioned about 600 customers are in stages of moving to Oracle ebiz 12. He did not have numbers for PeopleSoft 9, but did not disagree that the numbers of customers upgrading was small compared to the total population in each family. No different than the SAP or Microsoft experiences as they have pushed their customer bases to move to newer releases.
So I asked Jesper whether Oracle would consider a tiered maintenance pricing strategy: like 10% for customer category a) those happy at current release, with no desire to upgrade and mostly seeking bug fixes and tweaks (in line with what third party maintenance firms charge for basic support); 15% for category b) those that plan to stay and upgrade within their Oracle, PeopleSoft, Siebel etc family tracks and full rates for category c) those eager to get to next generation SaaS, SOA applications including Oracle's own Fusion.
He did not disagree with my POV that "one size fits all" pricing cannot work for the entire customer base but deferred any pricing decisions to Juergen Rottler, EVP for Customer Services.
I can only guess what Juergen will say. Great idea. Let's just make the rates for the 3 tiers - 25, 30 and 35%. You know with the weak dollar and the energy inflation and all -)
Update - SAP may sell TomorrowNow.