Feeds

Oracle, SAP under attack: How cloud upstarts steal their lunch

Biz bosses can't wait to offload gear to rivals, or so we're told

Designing a Defense for Mobile Applications

'Customers cannot tolerate paying maintenance at that level'

Another threat to Oracle’s maintenance business comes not from customers haggling down prices, but from consultants offering to keep Oracle installations ticking over without Oracle getting a look in. It’s a threat Oracle has taken seriously and is defending its turf through the US courts.

The database giant launched actions against Rimini Street in 2010 and CederCrestrone in 2012; Oracle accused the former of a “massive theft of its software and materials" through an “illegal business model” in supporting Oracle customers. Oracle partner CederCrestrone is accused of illegally supporting the E-Business Suite, PeopleSoft and Fusion Middleware apps and making “false claims” to prospective customers by saying it developed updates independently of Oracle.

CedarCrestone has denied any wrongdoing and claims the action is part of Oracle’s “broader war on competition” against third parties supporting Oracle software. Rimini said it acts within the rights granted under Oracle customers' licences and accuses Oracle of trying to scare off customers by claiming Rimini is engaged in illegal conduct. Oracle’s claims have echoes of the case hurled at defunct SAP subsidiary TomorrowNow; Rimini’s chief executive is the TomorrowNow co-founder Seth Ravin.

CedarCrestone and Rimini are small compared Oracle and SAP, but depending on the ongoing legal wrangling, they stand to grow: collectively they can take some serious bites from the maintenance cake.

Scavo said the fact Rimini, and others, is thriving shows there’s a quiet revolution and that Oracle cannot afford Rimini, CedarCrestone and others to break out.

“The fact there is only a few of them and doing so well is a sign customers cannot tolerate paying maintenance at that level," he said. "The thing that’s holding this industry back is the legal challenge. If Rimini Street prevails of Oracle that will establish the legal precedent and framework for other providers.”

All this means pressure is growing on Oracle and SAP, which have compromised on maintenance to keep the customers. “They say they never negotiate on maintenance, but people behind the scenes have seen Oracle and SAP negotiate on maintenance. This business model is at risk,” Scavo told The Reg.

Maintenance revenues will come under further pressure if Oracle and SAP let their fledgling online cloud businesses grow and adopt the subscription model of Salesforce and NetSuite, which gives you all the updates and support in one package.

According to research from IDC - a study sponsored by Flexera - 43 per cent of applications makers polled reckon their licensing policies must change to adapt to delivering software as a service; 48 per cent want to rewrite their licences for the cloud; 50 per cent want to address virtualisation; a quarter said they’d add subscription or term-based licensing; and 24 per cent said they’d offer a pay-as-you-use licence in the next 18 to 24 months.

Flexera’s Schmidt wouldn’t say whether Oracle and SAP were among the 200 software companies sampled, but IDC's survey did include “enterprise application software companies”. Even if SAP and Oracle didn’t participate, its competitors probably did - and that means those rivals are among those considering adopting potentially cheaper and more flexible licensing within the next two years. It piles further pressure on Oracle and SAP.

“The change in the market today is happening - it’s happening now,” Schmidt said. “Based, on our data, it seems to be accelerating and [subscriptions and user-based pricing] is something these software companies need to be looking at now, or are looking at. This will take quite a while to play out but it will pick up speed and become meaningful through that transition. We are in the early stages.”

Schmidt reckons SAP and Oracle will eventually end up offering subscriptions or user-based pricing in addition to their traditional approach to sales. “Based on the results of our IDC survey, there’s a clear mix of ideal licence types requested by the companies’ customers," he added.

Summary

These are changing times in business software. The web offers customers a new hope of usability and way out of paying large and complex licensing and maintenance bills. The result is phenomenal and enviable growth for Salesforce, NetSuite and the other software-as-a-service providers.

Oracle and SAP are no longer setting the enterprise software agenda and cannot rely on fat maintenance revenues to keep them going.

But this isn't the end for SAP and Oracle: for all their growth, their cloudy competitors remain tiny. Oracle and SAP can also rely on the sticky nature of enterprise software to keep them in business. Customers won't chuck out their Oracle or SAP systems - instead they'll add to them. And the fact Oracle and SAP applications hold so much customer data means the Goliaths will be relevant to government and business for a long time.

Also, Oracle and SAP have shown a willingness to change, with their own subscription-based services or by riding Amazon's AWS platform. There have been mis-fires, with Fusion and Business ByDesign, but this has come as Oracle and SAP have tried to protect their on-premises businesses.

But the evidence is there: Oracle and SAP are changing, either through their own willingness or the result of external pressures. What's not clear is how far they'll go and what they'll look like once this era is over. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Apple fanbois SCREAM as update BRICKS their Macbook Airs
Ragegasm spills over as firmware upgrade kills machines
THUD! WD plonks down SIX TERABYTE 'consumer NAS' fatboy
Now that's a LOT of porn or pirated movies. Or, you know, other consumer stuff
EU's top data cops to meet Google, Microsoft et al over 'right to be forgotten'
Plan to hammer out 'coherent' guidelines. Good luck chaps!
US judge: YES, cops or feds so can slurp an ENTIRE Gmail account
Crooks don't have folders labelled 'drug records', opines NY beak
Manic malware Mayhem spreads through Linux, FreeBSD web servers
And how Google could cripple infection rate in a second
FLAPE – the next BIG THING in storage
Find cold data with flash, transmit it from tape
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.