Oracle, SAP projects present opportunity for open source middleware vendors

Oracle's and SAP's recent price hikes are sending customers into the arms of other companies -- and it shows in the fiscal results

Oracle reported fiscal Q1 2010 results yesterday. Why should open source vendors care? Well, there's obviously a concern when the vendor you're hoping will buy you has a bad quarter. All joking aside, the reason open source vendors -- specifically middleware vendors -- should care is apparent when looking at Oracle's Application versus Database and Middleware new license revenue. By the way, Oracle, a database is just another middleware category in most IT circles.

In $ MillionsFiscal 1Q 2009Fiscal 1Q 2010% Change
Applications New License Revenue331317-4%
Database & Middleware New License Revenue906711-22%

Source: Oracle Q1 2010 Financial release (Pg. 10 of 12) [PDF]

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Oracle's Applications new license revenue declined by 4 percent year to year. While not great, a 4 percent decline is understandable in today's economy. The real shocker is the 22 percent year-to-year decline in Oracle's Database & Middleware new license revenue. Clearly, the economy plays a role in these results, but 22 percent is nearly six times higher than the decline in new applications licenses.

Since enterprise applications rely on middleware and databases, what's driving the 22 percent decline?

First, customers who've just received their maintenance bills, after a 20 to 40 percent hike, are thinking twice about deploying new middleware and database workload with the applications vendor. I say "applications vendor" because both Oracle and SAP have hiked their maintenance rates. As a result, customers have taken a second look at their combined Applications and Middleware spending.

It's difficult, not impossible, for an SAP applications customer or an Oracle applications customer to vote with their wallets and buy applications from a vendor that isn't raising prices by 20 to 40 percent. It's much easier for these customers to purchase middleware from someone other than Oracle and SAP. Oracle's revenue strongly suggests that this is occurring. As RedMonk's James Governor writes:

Oracle and SAP - being an app duopoly doesn't mean you can raise maintenance fees at will. customers are playing hard ball right back at you

Now would be a great time for open source middleware vendors to target SAP and Oracle applications customers. One could argue that open source middleware vendors are already doing this, as demonstrated by Oracle's revenue, and that's probably true. So too are commercial enterprise middleware vendors; I know that IBM is doing just this. But keep in mind that SAP and Oracle applications projects take months, if not years, to implement. There's still time to insert open source into an SAP and Oracle projects. Go forth and prosper! Or at least use the open source product for better overall prices from SAP and Oracle.

Follow me on Twitter: SavioRodrigues.

p.s.: I should state: "The postings on this site are my own and don't necessarily represent IBM's positions, strategies, or opinions."

Copyright © 2009 IDG Communications, Inc.

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