May 04, 2009, 8:23 PM — Feeling pressure from recession-hit customers and rivals, Oracle Corp. Monday said it will give small, short-term discounts to enterprises that stick with aging versions of its software.
One analyst called the discounts, which work out to about 10% cuts, "not earth-shattering at all." Oracle ruled out broader, permanent cuts in its support and licensing fees.
Oracle's premier support program provides updates, fixes and technical help to software customers. Oracle charges an annual fee of 22% of the software's upfront license cost for support.
Once a version of the software has been available for five years, users are moved to extended support, which adds 10% to the support fee. That means extended support customers pay 24% of the license price per year.
Oracle is essentially letting customers whose software has hit the five-year mark to transition to extended support for a year -- and in one case, two years -- without a price increase.
The four applications eligible for a year of waived fee increases are Oracle E-Business Suite Release 11i10, JD Edwards Enterprise 8.11, Siebel CRM 7.8 and Oracle Database 10g R2. PeopleSoft Enterprise 8.9 is eligible for two.
Oracle announced the temporary price cuts Monday at the International Oracle User Group's annual conference, COLLABORATE 09.
"We saw what is going on in the market. We are all facing the same pressure as our customers," said Juergen Rottler, executive vice president for Oracle customer services, in an interview.
The discounts start kicking in as early as June for PeopleSoft software, and as late as November 2010 for the E-Business Suite.
Why didn't Oracle make broader, deeper cuts in premier or extended support?
"Because we don't think that's necessary or appropriate," Rottler said. "We offer the industry's best support offering. We think it's very competitively priced for what it enables, which is not just fixing problems but also preventing them. In our mind, that's pretty unique."
Scott Rosenberg, CEO and founder of Miro Consulting, said that while the financial impact for most Oracle customers "is not huge at all, ... any price relief from Oracle will be welcomed by Oracle's user base."
Oracle's announcement follows two made by rivals last week.
Enterprise cloud vendor Salesforce.com Inc.'s CEO Marc Benioff called for "the end" of software support and maintenance fees. Arch rival SAP AG said it would delay increasing its support fees.
Rosenberg said that despite the economic pressure, Oracle is unlikely to make more price cuts.
Oracle "guards its support revenue stream zealously," he said. Customers seeking discounts will continue to have "to fight tooth and nail."
