Asian firms can gain higher software value

SINGAPORE--Support services is key to ensuring that software investments continue to appreciate over time, says Oracle.

In an interview with ZDNet Asia, Lim Chon-Phung, senior vice president of Oracle Support and Oracle On-Demand in Asia-Pacific and Japan, said unlike hardware, software investments can appreciate over time--but only if companies invest in services.

"We want to make sure that when clients buy Oracle's software plus Oracle support, their IT environment will be an asset that will appreciate in value over time," Lim said. "In the hardware world, however, your infrastructure will depreciate if you do not manage it carefully."

Lim noted that many enterprises tend to focus more on what they need from their software as well as the implementation process. "The question of how they then move from implementation to production has less attention," he said, adding that this observation in the Asia-Pacific region did not differ from that of North America and Europe.

"The focus on production support is often less emphasized," Lim said, noting that this has led to fewer systems integrators with the relevant skills in production support.

"The application providers and systems integrators tend to generate incremental implementation revenue for every dollar of software that customers buy," Lim said. "Because of this, there is a lot of focus in the industry on getting the application successfully implemented."

Getting operational
Noting the importance of post-implementation or production support, which helps ensure that an application can meet the operational needs of the business, Lim said the lack of skills posed a challenge.

"There are not enough good operational skill sets available," Lim said, adding that Oracle is working to address this "big gap" through its services organization by providing training services to customers.

Although Lim acknowledged customers' concern over support services which may constitute an increasing portion of their software investments over time, he pointed out that the cost of enterprise software is determined based on the premise that companies want access to software upgrades and other enhancements.

"A large chunk of Oracle's R&D (research and development) efforts go into software enhancements…and the bulk of the requests for future upgrades comes from customers," Lim said.

"Customers see that [as] a key part of ensuring that their software is enhanced further," he added, noting that Oracle customers typically pay 22 percent of the software license cost to gain entitlements to future upgrades.

Enterprise software companies like Oracle focus on maintenance and support services for good reason.

According to a Gartner research report last year, support services is important because financial analysts and investors normally expect a high percentage of customers to buy and renew maintenance plans, and they relish the predictability of this annuity stream, which complements the higher but inevitably more spiky license revenue streams enjoyed by software companies.