Oracle cuts price of extended support

Oracle has given its customers a boost by offering short-term discounts to enterprises that stick with ageing versions of its software.

The move was announced at the International Oracle User Group's annual conference, COLLABORATE 09.

Forrester analyst Ray Wang said the move was intended to offer customers running apps packages that Oracle has acquired in recent years more time to adopt Fusion Apps. “With the slow down, Oracle may be anticipating slower upgrade rates.

"While no clear date and product road map has been communicated to customers, removing the price pressure on extended support fees provides customers with some breathing room on upgrade timing,” Wang noted.

The four applications eligible for a year of waived fee increases are Oracle E-Business Suite Release 11i10, JD Edwards Enterprise 8.11, Siebel CRM 7.8 and Oracle Database 10g R2. PeopleSoft Enterprise 8.9 is eligible for two.

Oracle's announcement follows action by rivals last week.

Enterprise cloud vendor's CEO Marc Benioff called for "the end" of software support and maintenance fees. Oracle arch rival SAP said it would delay increasing its support fees.

Scott Rosenberg, CEO and founder of Miro Consulting called the discounts, which work out to about 10% cuts, "not earth-shattering at all." Oracle ruled out broader, permanent cuts in its support and licensing fees.

Oracle's premier support program provides updates, fixes and technical help to software customers. Oracle charges an annual fee of 22% of the software's upfront license cost for support.

Once a version of the software has been available for five years, users are moved to extended support, which adds 10% to the support fee. That means extended support customers pay 24% of the license price per year.

Oracle is essentially letting customers whose software has hit the five-year mark to transition to extended support for a year -- and in one case, two years -- without a price increase.

"We saw what is going on in the market. We are all facing the same pressure as our customers," said Juergen Rottler, executive vice president for Oracle customer services.

The discounts start as early as June for PeopleSoft software, and as late as November 2010 for the E-Business Suite.

Oracle did not make broader, deeper cuts in premier or extended support, "because we don't think that's necessary or appropriate," Rottler said.

"We offer the industry's best support offering. We think it's very competitively priced for what it enables, which is not just fixing problems but also preventing them. In our mind, that's pretty unique."

Forrester’s Wang said Oracle user groups may want to take a look at the SUGEN KPI's and see if they are applicable to Oracle's environment.

Rosenberg said that while the financial impact for most Oracle customers "is not huge at all, ... any price relief from Oracle will be welcomed by Oracle's user base." Despite the economic pressure, Oracle is unlikely to make more price cuts, he added.

Oracle "guards its support revenue stream zealously," he said. Customers seeking discounts will continue to have "to fight tooth and nail."

Copyright © 2009 IDG Communications, Inc.

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