Waived Oracle Fees Could Point to Deeper Issues

By | Feb 24, 2012
Topic: CRM/ERP

On Monday, Oracle announced that it would be waiving its Extended Support fees for E-Business Suite Release 11i and 12.0. While this is certainly good news for customers using these applications, giving up on a steady revenue stream raises questions on just how well Oracle is doing amidst growing competition.

Waived Oracle Fees

Oracle's E-Business suite products, which include enterprise resource planning, supply chain management and CRM applications, comes with a five-year premier support window. Once that window closes, customers can either choose to upgrade to a newer version of the software or pay extended support fees to continue to receive maintenance updates and bug fixes on their software. The support fee business is a lucrative one, as many customers are reluctant to upgrade and more than willing to pay the high-margin fees to keep their current software working correctly.

Oracle's announcement, which you can find on Oracle's blog, is that they will waive the extended support fees for version 11i through November of 2013 and version 12.0 Premier through January of 2015. Oracle previously waived the first year of fees for version 12.1 as well. While Oracle didn't give a specific reason for the waived fees, as this Infoworld article points out, it's probably a move to retain customers who would otherwise consider cheaper alternatives as opposed to paying support fees.

Waived Oracle Fees and the Future of E-Business Suite

While the waived support fees could simply be a gesture of goodwill for loyal customers, it more than likely reflects difficulty in getting both new and existing customers to try newer Oracle offerings. As this Forbes article discusses, Oracle's recent numbers aren't anything to get excited about, and some forecasters have the company sailing into rough seas ahead.

It's no secret that Oracle pushed back against cloud computing during its infancy, and even after eventually giving in to the next big thing in IT, the company's cloud offerings fall far short of other major players. Many cloud-based application providers, like Salesforce, are growing in popularity among Oracle's standard user base and are now looking to expand their reach into a number of other technology areas and may eventually rival the breath of scope that E-Business suite has.

Granted, enterprise and midsized corporations never really turn on a dime, and those already using Oracle products will have to really want something else to commit to a change. But giving away these fees show that Oracle is worried about something.

Perhaps, these fee holidays are simply a way to keep customers using Oracle products until the company's new Fusion Applications, which promise to be a next-generation business suite, get fleshed out a little more. Once the Fusion Apps become a true replacement and upgrade for E-Business Suite, Oracle may have something to offer existing customers that can rival what other companies are offering, with an added bonus of an easier transition to a new product.

Whatever happens in the future, giving up on these fees is certainly going to hurt Oracle in the near term. One would expect that an established company like this has some grand plan in mind, but even tech giants sometimes stumble. News like this is nothing to be too concerned about, and is a great bonus to Oracle customers who weren't planning on upgrading in the near future, but it does signal that the company's moves throughout 2012 bear watching for other signs of desperation.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.

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