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Oracle and SAP Offer Token Relief on Annual Support Fees

The two largest Enterprise Resource Planning software manufacturers have delayed annual support maintenance contract escalations for several of their ERP software solutions. SAP has announced it will stagger is previously proposed software maintenance rate hikes over a longer period and in predictable turn, Oracle announced one week later it would do the same for some of its older legacy applications.

While the price delays don't affect all users and do not reduce existing expense amounts, these efforts stand in stark contrast to the enterprise software makers historical attitudes of not budging when it comes to their annual maintenance revenue streams. For instance, is a recent January interview by Informationweek with Oracle President Charles Phillips, the confident President said the 22% annual software maintenance amount is never negotiable, adding "We are sticklers on that."

However, in response to both the depressed economic climate and a similar move by rival SAP, Oracle is delaying fee increases for one year that would have started in 2010 on some of its legacy applications. The delay applies to customers transitioning from the premier support plan to the extended program. Oracle customers are transitioned to the extended support program once their version of software has been available for five years. The Oracle E-Business Suite Release 11i10, JD Edwards 8.11 and Siebel Systems CRM 7.8 are now eligible for a year of waived fee increases. PeopleSoft 8.9 is eligible for two years of waived increases. Following the delay period, maintenance rates will rise from 22% to 24.2% for some aging ERP applications.

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According to Bill McDermott, SAP President of Global Field Operations, SAP is raising annual maintenance rates from 17% to 22% in order to match market (Oracle) rates. SAP's phased approach begins in 2010 when it elevates to 18.9% and will continue annual increases until reaching 22% in 2015. In a somewhat transparent effort to associate value with the increased cost, SAP indicates it will achieve 'key performance indicators' before each successive rate hike kicks in. The key performance indicators have yet to be identified.

According to McDermott, Oracle would never offer a conditions-based maintenance increase, "They can't do it because they have a different business model," he said. "If you listen to Oracle CFO Safra Catz, you hear her say Oracle is doing so well because maintenance fees are liquid gold for them. It's liquid gold until a customer says, 'What can SAP do? Let's give SAP a call to see if they can do better.'"

While the metrics are unclear, SAP customers are hopeful for some true relief. "I will give SAP a ton of credit, because they listened to the feedback of their customers," Dow Corning CIO Abbe Mulders said. "Enterprise support has been a very controversial issue over the last year, but SAP didn't have to put those metrics in place. No one else in the industry today has any kind of measures on maintenance dollars."

May 11, 2009

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tags Tags: Oracle, SAP








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