by Thomas Wailgum

Oracle Is “The Teflon Don” of ERP Software Maintenance

Jan 19, 2010
Enterprise Applications

Why is Oracle so untouchable when it comes to maintenance and support fees?

You remember John Gotti, right? The infamous crime boss of the Gambino family in New York also known as “The Teflon Don,” since nearly all attempts to convict him never stuck.

Right now—if you’ll humor me with the analogy—Oracle has become “The Teflon Don” of the maintenance and support business: While SAP is castigated and raked over the coals about its maintenance fees by customers, analysts and cloud-computing competitors, Oracle executives are basking in the glow of their 92 percent software maintenance profits margins. Those margins most recently delivered $3 billion in quarterly profitability to the vendor.

SAP, on the other hand, just endured a grueling year of customer complaints over the proposed and forced move to its Enterprise Support offering, with an increase in fees that would eventually match Oracle’s fees. The uprising by the powerful SAP international user group, SUGEN, combined with the Siemens PR nightmare and unprecedented Enterprise Support KPI saga contributed to too many seasons of customer discontent.

The result of it all: A new SAP two-tier maintenance offering that appears customer-friendly on the surface, though several industry watchers aren’t completely sold on SAP’s benevolent intentions.

All along, it’s like SAP had been constantly forced to “defend its life” as it related to executive decisions on maintenance and support. And this prolonged stay in Judgment City was no fun at all.

As for Oracle? Well, its maintenance business appears untouchable.

Where’s the customer outrage over Oracle’s typically non-negotiable 22 percent maintenance fees? Crickets. Where’s the Oracle user group indignation regarding a lack of KPIs for service and support levels that don’t match what customers feel they are paying for? Tumbleweeds. Where’s the uproar over Oracle President Safra Catz’s infamous quote: Maintenance is a “very profitable part of our business, and as the number gets bigger and bigger it’s really impossible for us to actually spend our way through it”? Silence.

The fact is, there is no palpable Oracle customer outrage—at least none that comes close to the level that SAP has faced. Which is surprising. If both enterprise software vendors are going to charge customers 22 percent per year for maintenance and support, then why are Oracle’s customers so…satisfied with their Oracle support?

Perhaps I’ve answered my own question. We, on the outside, may claim that Oracle customers are locked-in to Larry Ellison’s ever-expanding product line, but it just may be that Oracle’s 22 percent price point is just fine with its customers. (It’s a free country, after all.) Said one CIO in a recent article: “Paying maintenance is like getting a tune-up on your car…. It’s a valuable service and part of doing business.”

Which reminds me of something another well-known and fictional Don said in The Godfather movie: It’s nothing personal for Oracle. It’s just business.

Do you Tweet? Follow me on Twitter @twailgum. Follow everything from on Twitter @CIOonline.