ERP support: How far will Oracle go to protect its golden egg?

Oracle has been suing third-party support providers, which could set a bad precedent for consumers and would-be competitors alike

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Timing is everything. And just as the Great Recession has rocked the economies of the world, it's no coincidence that software buyers have become more aware of the arduous fees of their support contracts. Industry analysts, such as Altimeter Group's Wang and Forrester Research principal analyst Paul Hamerman, say there's been a noticeable increase in interest for third-party support services. Wang's survey data from his clients and software user group meetings shows a 22-point increase (113.7 percent) among clients looking at this option as part of their apps during the past six months.

Oracle is not alone in its lucrative maintenance and support service: SAP, Lawson, Infor, Epicor -- right on down the list of enterprise software vendors. Those vendors can earn roughly 50 percent of total sales for maintenance and support fees, according to the Cowen and Co. research report. Those fees, notes the report, are "a highly reliable, high margin, recurring revenue stream that provides earnings stability and enables margin expansion even if license sales falter."

While Oracle has been able to squash most customer resentment regarding its 22 percent maintenance fees for years, SAP has not. SAP was embroiled in a year-long maintenance and support saga that ultimately resulted in a PR nightmare with high-profile customers such as Siemens, creation of a new "tiered" maintenance offering and the dismissal of CEO Leo Apotheker.

Yet Oracle's maintenance fees keep on rolling in, despite a couple of recent and very public mistakes: more problems with Oracle's new My Oracle Support portal and a head-scratching PR-brouhaha over why Oracle shut down a free and extremely popular support services blogger -- all as Oracle execs try to assuage edgy Sun Microsystems customers about their future together.

Now, Oracle's legal sights are squarely set on Rimini Street and another protracted courtroom war. Which takes us back to where this started: Oracle v. SAP, which commenced with Oracle's filing on March 22, 2007, and appears to have an end in sight. After multiple delays and extensions, and scores of hearings, depositions and motions to compel, the trial has been scheduled for Nov. 1, 2010.

Oracle has been dogged about protecting its maintenance and support revenue streams. That much is unambiguous. But if more award-certified partners in its channel start following CedarCrestone's lead, will Oracle start throwing its legal might at them, too?

One potential action was suggested by Judge Laporte. During the CedarCrestone proceedings between Oracle and SAP, the court transcript shows that she offered this nugget to Oracle's lawyer, as to what the vendor should do to CedarCrestone if Oracle discovered support practices it didn't care for.

Judge Laporte quipped: "You may yank those awards back."

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This story, "ERP support: How far will Oracle go to protect its golden egg?" was originally published by CIO.

Copyright © 2010 IDG Communications, Inc.

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