The SAP UK & Ireland User Group conference I attended last week was over by the time the jury in the Oracle v SAP trial came back with its verdict. However, that doesn't mean the maintenance cost issue has gone away. During the conference, one customer publicly asked Jim Hagemann-Snabe a pointed question about flexing maintenance in difficult economic times when user numbers are reduced. Mr Snabe's response was hardly convincing. Prefacing his remarks with a nervous smile, he referred to the license discounts received at the time of contract negotiation as though it represents an exchange of value or some sort of favor SAP does in return for maintenance fees down the track. Yeah right and once again: buyers beware.
The conference was interesting for one thing: the re-emergence of the maintenance issue and a demand for SAP to provide the user group with information about who has bought SAP solutions. User group chairman Alan Bowling was keen to stress the independent nature of the group, something Mr Snabe says he welcomes. If that's the case then it will be interesting to see what progress is made on the customer detail issue. Given all those 2011 maintenance renewal invoices floating about, it can't be that hard to provide the detail. Can it?
Aside from this issue it was interesting to have confirmed that the various SAP user groups around the world are not acting in a coordinated manner. That doesn't surprise given what we saw coming out of each territory during the time when the SAP maintenance issue was current. It also doesn't surprise that some user groups are more independent than others. This is always a thorny issue. If the vendor is supplying financial support to a user group then it is far more difficult for it to exercise true independent status.
My sense is that the UK group at least will spend the next year bundling this argument with others around roadmap access and improved support for Business One. It's a reasonable strategy but I do wonder whether it will help deal with the long term issue of maintenance cost for those that are in steady state, mature deployments. Enter stage left Frank Scavo discussing the next stage in the legal battles around enterprise software maintenance. Frank ensures that his audience understands that while the SAP/TomorrowNow case was about IP theft, he outlines why we should look at the Oracle v RiminiStreet case differently from that which has just been decided:
So, why is the Rimini Street case important? Because the rights of customers to not be locked into a single source for maintenance and support needs to be preserved. As I've written many times in the past, when you buy a Lexus, you have the right to take that Lexus to any third-party repair shop. Lexus cannot try to stop you or threaten to void your warranty if you do so. If they tried, the US Department of Justice (DoJ) and 50 state attorneys general probably would file suit. Why should the enterprise software industry be any different?
DoJ is reported to be looking into the Oracle/SAP matter. If so, and while it's learning about this industry, it should also take a look at the restraint of trade and antitrust implications of both SAP and Oracle's behavior in attempting to prevent a viable third-party support industry.
That's a solid summation and even more apropos when set against the $1.3 billion the jury awarded. Like many others, I was taken aback by the award and initially thought that SAP would have to appeal. But what if it doesn't?
Dennis Byron on Seeking Alpha thinks SAP should pony up and move on.
Although I did not read the Oracle expert's testimony or filings, it looks like his and the jury's logic is that SAP should pay the U.S. full price-list line-item charge for each piece of software Oracle offered for sale in 2006/2007 TIMES MAYBE A 1000 MULTIPLIER.
I've not run the math but then I would not be surprised given what we were told about the actual fees TomorrowNow earned during its brief existence. But what does this mean in the wider context of companies signing maintenance contracts?
- Penalty award significant in size but not detrimental to SAP
- Verdict does not impact the third party maintenance market
- HP escapes with minimal damage
Superficially that might seem reasonable based upon Ray's detailed knowledge of the market. It certainly supports Frank's contention. But with such a huge award making headline news, Oracle is bound to make the most of the publicity as part of a scorched earth policy to rid the market of third party maintenance of any kind it does not approve. The shadow the award casts is such that Oracle can engage in a FUD campaign that has the effect of muddying the waters in the RiminiStreet case.
Much more worrying must be the position of buyers. If Oracle is in a position where it can use this result to create what amounts to a monopoly by default, even though it has not contested the legality of third party maintenance as a principle, then customers could easily find themselves with an ever spiraling cost burden that makes today's 22% annual maintenance bill look cheap. The same goes for SAP customers. What can customers do?
- Some have voted with their wallets and moved to SaaS as a way of moving capex to opex. That trend shows no sign of abating. Neither does the back and forth baiting between Larry Ellison, CEO Oracle and Marc Benioff, CEO Salesforce.com and Oracle alumnus.
- SAP has already signaled the ending of Java as a technology it supports by announcing the cessation of development of WebDynpro Java in favor of WebDynpro ABAP. Will other dev shops think of ditching Java as they look warily towards Oracle's apparent intent to monetize what we all thought was open source? If so then what will the viable alternatives look like?
- Users can encourage user groups to act in concert to ensure that concessions achieved in one market are leveraged elsewhere wherever possible. SUGEN is one such attempt in the SAP community but much more could be achieved if the eight or so regional SUGs worked together more closely. That might be tough given their varying levels of independence but it is do-able.
- I say this time and again but it's worth the repeating: look at options. Regardless of where you are in the buying and life cycle, there will always be wiggle room for negotiation if the prospect of using third party providers is not viable for your circumstances.
- Review the reasons why Oracle customers are dissatisfied with Oracle's quality and cost of service. Those same kinds of argument can and have been repeated for SAP customers. If those reasons ring true then consider how the issues might be overcome.
- More generally, take note of the DOJ case related to General Services Administration (GSA) contracts worth $1.1 billion over which Oracle is accused of overcharging. If Oracle can try it on with the government then what will they do to you?
When taken in the round, these are all issues of trust. As the antics of vendors that have been part of enterprise apps folklore become more public, you have to wonder what price trust...