August 21, 2018 | Kurt Moydell | Senior Vice President, Global Sales and Marketing
In his recent article entitled Why Software Giants Are Falling, author Robin Fry provides reasons why Oracle and SAP core businesses are under financial pressure. He reminds us that the big enterprise and infrastructure software vendors have spent decades amassing huge profits from entrenched on-premise installations, high software support fees, and a steady cascade of license audits. The fact that Oracle and SAP want to “lock-in” customers should come as no surprise.
To prevent future lock-in, we recommend that you investigate three effective counter-measures, in tandem or stand-alone:
- Third-party SAP and Oracle support is replacing software vendor support, restoring stripped away services while cutting support fees by more than half.
- Effective license compliance resources are available to ensure license readiness, audit preparedness, and audit defense.
- Best-of-breed cloud offerings are ready to adopt now, so SAP and Oracle customers need not wait for their solutions to mature. According to Mr. Fry, increasingly more SAP and Oracle customers are now determinedly looking elsewhere for replacement solutions.
Third-Party Support Has Become Mainstream
Mr. Fry writes that many Oracle and SAP customers pay costly maintenance and support fees as an insurance policy because they prefer the certainty and robustness of earlier software versions and want to avoid distractions and disruptions of unnecessary upgrades. He goes on to write that maintenance contracts are just automatically renewed, without thought, viewed as a necessary cost of doing business. Although the big software vendors enjoy huge profit margins, free cash flow, and shareholder value, exorbitant support fees are a major drag on the software costs of their customers.
Third-party support delivers a highly personalized and responsive model that outmatches the software vendors’ self-service, one-size-fits-all support. In fact, we find that customers start using support more vigorously once they discover our experts are readily available and eager to solve the problem or just answer a question. Thousands of organizations running Oracle and/or SAP have adopted this new model to gain better support and save money to help fund future innovations. Spinnaker Support saves customers on average 62% on support fees and frees them up from much of the software vendor lock-in.
Fueling the decline of the software giants
For example, despite spending more than $35 billion to acquire more than 60 companies, Oracle has failed to earn a reasonable return-on-investment. What is more shocking is that anyone would be, including the vendors, surprised that they are continually losing ground to new cloud companies after pumping billions of dollars into their cloud offerings. Just this week Oracle was named in a lawsuit for allegedly engaging in coercion and threats to sell cloud computing products. “In truth, Oracle drove sales of cloud products using threats and extortive tactics,” the filing reads. “The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable (and ultimately driving away customers).” These tactics weren’t known to investors and were “expressly denied by the company,” as stated in the case filing.
Protection Against Licensing Traps and Audits
SAP and Oracle have had decades to build a loyal customer base, but they seem to be more focused on their own profits regardless of the cost by habitually challenging their customer base with software license audits. As clearly stated by Mr. Fry, many such audits trigger massive demands for under-licensing, arrears of support and maintenance and penalties – and this may be for software that is neglected or rarely used. When the license management divisions get involved, long-term relationships count for nothing.
The best audit defense is to keep your ERP licensing and usage well documented and well managed. Our well laid out strategy for customers stems from educating and understanding the causes and reasons behind ERP vendor audits. Tracking installed software and monitoring software usage sounds rather simple, but when companies have hundreds to thousands of users and hundreds of instances globally, it becomes extremely complex. Spinnaker Support has experts to advise customers, help interpret existing contractual agreements, and delivering established partnerships to bring in full-service audit defense teams.
Partnering with Spinnaker Support gives customers alternatives whether you are staying with your on-premise solution, transitioning to a new vendor or planning a future migration to Oracle or SAP’s cloud products. We can help customers by lowering on-going support costs for older version as long as customers need, provide unbiased advisory services for best-in-breed cloud solutions, or bridging time until you move forward with Oracle of SAP. For the first time, with all the new players emerging with best-in-breed cloud solutions, customers can move away from Oracle and SAP and end their constant concern over being audited and facing unfair penalties. We are here for you to support your SAP and/or Oracle systems whether it is short-term during a transition or long-term for the lifetime of your investment.