Oracle Customers Reveal Angst on Costs, Services, Maintenance

 
 
By Don E. Sears  |  Posted 2010-11-23
 
 
 

Customers with legacy J.D. Edwards and PeopleSoft applications have some big decisions to make about Oracle Fusion in the coming year, and many of them will be looking beyond the enterprise software giant out of feelings of frustration and lockdown, according to a new Computer Economics report titled "Go Forward Strategies for Oracle Application Customers."

Ironically, customers who are most frustrated with Oracle's licensing and support practices contend they will keep with or even invest more with the company. Roughly 58 percent of Oracle clients in this report are frustrated; Yet, 37 percent are planning to invest more in Oracle products in the next three years.

What choice do some of these companies have? It depends on which applications and technologies you are speaking about, said Frank Scavo, president of Computer Economics, in an interview with eWEEK.

"Hardware and even databases are easier to migrate, but vendor lockdown for application software is not easy to change," said Scavo in a November 19 phone interview. "The heart of Oracle's business is the maintenance business ... Oracle has publicly said it makes 90 percent margins in maintenance."

In maintenance? What other business has that kind of margin in maintaining its products? Perhaps a car dealership, but customers don't have to go to a dealer for service.

At issue aren't just the exorbitant maintenance costs, but also how maintenance is bundled with future upgrades of the software. To get those upgrades, you have to buy maintenance, said Scavo, who made a point of saying that this is not unique to Oracle. Most enterprise software vendors practice this upgrade product strategy.

But for those customers able to make a move, see what a few of them have to say in the same report.

"Expensive maintenance with marginal value equates to questions for the future," wrote a distribution industry customer. "Oracle is the big guy and wants to claim customer service, but in reality it is all about how much they can make and very little about customer loyalty. I hope their model works for them, but I'm not sure midtier customers are enamored with the model."

A manufacturing industry executive wrote: "I expect to migrate away from Oracle as much as possible because they are not very helpful."

"JD Edwards is being phased out in favor of internally developed tools," wrote a housing industry manager. "These systems cost so much to put and embed into an organization that you feel trapped and incapable of considering the alternative. We ... [decided] to develop an application tailored to our needs, which slowly eats away at our dependence on JD Edwards."

"We expect the maintenance and other ongoing costs to continue escalating as that appears to be Oracle's strategy," wrote a CIO in the automotive industry.

For software customers who are locked in, there is a lot of "inertia in the sunk cost," and it is incredibly challenging to switch out, said Scavo.

"Fusion applications represent the point at which a customer is able to look at options," said Scavo. "If I'm on a legacy JD Edwards system from eight years ago, it is an opportunity to ask -Do I double down with Oracle or do I look elsewhere?' and consider SAAS [software as a service] options, SAP, Microsoft and others. Oracle customers have big decisions to make."

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