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Oracle customers face rising support costs following Fusion application roll-out delay

Jenny Williams

Oracle remains tight-lipped over a planned price hike in support fees.

The additional support fees are a result of Oracle's delay in releasing Fusion Applications. This has resulted in some users paying for extended support, rather than upgrading E-Business Suite (EBS).

The delayed release of Fusion applications, which has been six years in the making, may now cause customers to face additional costs as a result.

Fusion applications were expected to be released for general availability in March 2011. The applications have now been released under controlled availability through its Early Adopter Programme (EAP). General availability is still under review.

However, Debra Lilley, president of the council and leader of the UK Oracle User Group (UKOUG), said some EBS users now have too little time to assess the new product.

She said customers that waited to compare the latest version of Oracle's EBS (Release 12) upgrade options with Fusion applications will be unable to upgrade before extended support fees are introduced in November 2011, meaning customers will face additional support costs as a direct result of the delay.

 


 

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Oracle previously introduced lifetime support and Applications Unlimited in response to user concerns over upgrading to EBS by a certain deadline. This provided three years of extended Premier support for an additional annual fee of 2.2% on top of the 22% of the original licence fee they already pay for support.

The lifetime support also gave customers a choice about when, and if, to upgrade, rather than following a three-year upgrade cycle.

Two years ago, Oracle waived support fees for its major product lines throughout 2010 and 2011, to help customers plan upgrade cycles. However, Oracle said Fusion would be available before the end of extended Premier support, so customers could decide whether to upgrade or go straight to Fusion.

"Now customers are caught out and perhaps Oracle should consider waiving it again as they didn't bring it out when the user group expected," said Debra Lilley.

Lilley added that Oracle risks customers going elsewhere for support.

Floyd Teter, member of the Oracle Applications User Group (OAUG) Fusion Council, said customers facing additional fees for extended support are unhappy.

The OAUG is advising customers to upgrade to the latest release of the product the company is already using, to avoid extended and sustaining support, and consider upgrading to use Fusion applications in a co-existence strategy in the future.

David Roberts, executive director at the Corporate IT Forum, said Oracle is losing touch with customer realities.

"There is now a gap between customer expectations and the ability to deliver what the customer wants," David Roberts said.

"Organisations are becoming nervous at the lack of roadmap delivery and are concerned at the potential complexity and capability of the 'one size fits all' middleware platform vision. And if it costs them money, they'll also be cross," Roberts said.

He added it's difficult for customers to look elsewhere for Oracle application capabilities as the company has bought so many of its competitors. In addition, it's technically difficult to solve issues arising with Oracle's products.

He believes Oracle uses free trial periods and premier support periods to hook customers into extended support services to get more revenue.

Recent financial results from third-party organisations offering Oracle support would suggest customers are opting to buy support services elsewhere.

 

Third-party Oracle support

Third-party organisations offering Oracle support, such as Rimini Street, claim to charge at least 50% lower annual support fees than suppliers. The company reported record sales bookings of $33m for its second quarter of 2011 - an increase of 120% year-on-year.

Seth Ravin, CEO at Rimini Street, said: "Hundreds of Oracle and SAP licensees are already enjoying their easy and successful switch to Rimini Street Support, which enables them to save up to 90% on their total cost of maintenance."

But support is key business for Oracle. In Oracle's most recent financial results, the company reported software licence updates and product support sales were up 15% to $4bn in fiscal year 2011, Q4. The report showed sales of software licence updates and product support accounted for 42% of Oracle's total revenue for the year ending 31 May 2011.

Martin Mutch, CEO at Oracle consultancy firm at Rocela, said some Oracle customers are moving to third-party support. He said a move to third-party support requires detailed risk analysis, as Oracle can charge substantial back penalties and other costs for moving.

He added that some sensible clients have moved to third parties because it has heavily modified its applications. Facing end-of-life support, it makes little sense to stay with Oracle support when lower fees are offered by other companies.

"But on the whole, most customers seek the security of Oracle support," said Martin Mutch.

Mutch said preventing clients from "de-supporting" Oracle services is a priority for the company to maintain its profit stream. This has led to Oracle's strategy to eliminate third-party offerings, such as SAP's TomorrowNow.

"Whether that's monopolising behaviour or just how the software world works, is another matter," Mutch said.

He added: "From a client point of view, Oracle need to balance clients' antagonism during a time of economic pressure when increasing support fees because of its own delays creates tension. They need to balance that with taking money."

Oracle declined to comment.

 

Should businesses upgrade to release 12 of Oracle E-Business Suite? Martin Mutch, CEO at Oracle consultancy firm, Rocela, discusses the challenges surrounding EBS upgrades

 

Mutch said some businesses benefit upgrading from Oracle E-Business Suite (EBS) release 11 to 12, while other companies have the budget spare to make those changes. However, Mutch believes some of Oracle's customers are pushed to upgrade with no business case to do so, having to carry the burden of additional costs.

"Oracle doesn't want people lingering [on older versions] as it's inefficient to support people," said Mutch.

He added that some public sector organisations will have to find budget for additional enhanced support fees without a need to upgrade and with limited to resources to support it.

Mutch said it's a big dilemma for businesses considering whether to upgrade to release 12 or wait for the ever-delayed Fusion applications.

"There's a lot of effort and risk in terms of the upgrade," he warned.

 

 

Image: Peter Kaminsky


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