Is Oracle repeating SAP's mistakes?


Is Oracle about to make the same mistake that SAP did last year, and take its users for granted?

Oracle’s stealthy move to raise the price of some of its database management modules could be as damaging to its relationship with its customers as SAP’s decision to raise the cost of its enterprise support prices.

In cash terms the Oracle move is likely to cost its customers far less than SAP’s abortive decision. But the issue is not just about money, it is also about the message to customers.

Both these industry giants seem to have struggled to manage the potential contradictions of customer relations in a recession. It is a truism to say that it is cheaper to keep a customer than it is to acquire a new one, particularly in a downturn.

Equally, when markets are tough, it is easier to up-sell, or cross-sell, or find another way to extract more revenue from an existing customer, than it is to acquire a new one.

The way you do it matters. In the downturn, customer relationship management really is much more than an acronym for an IT system.

So while Oracle won plaudits for freezing its enterprise edition database licence prices, it will surely provoke a backlash from users for the 40% increase in licences for its diagnostic and tuning modules.

These modules are essential for getting maximum performance from the databases – and in a period when everyone is demanding more for less, Oracle users might have expected Oracle to freeze these prices too.

There is money to be made from selling solutions to meet business pain points and surely Oracle should have been trying to boost uptake of these modules by demonstrating the ROI they deliver, rather than penalise those who have already invested in them.

SAP says that this was what it was trying to do when it increased its enterprise support prices – deliver a better service and charge more for it – and it was forced to back track.

Timing and messaging were wrong, and so was the value proposition for many SAP users.

Putting up prices as the recession bit was bound to cause a backlash and it drew attention to just how much enterprise users actually pay for support.

Still, SAP has made amends with its agreement with the Sugen global user group network on KPIs before any price increase comes into effect.

As executive board member Bill McDermott said at last week’s SAP World Tour event in Birmingham, these KPIs set a new benchmark for enterprise IT.

McDermott’s message was slightly diluted when new UK managing director Tim Noble subsequently blurted out “What KPIs…”

Still, he has only been in the job a month and he insists that he “really wants to work closely with customers”.

To say otherwise would be almost as foolish as the 50 percent of the 200 UK business leaders surveyed by SAP for last week’s event, who did not say they believed “that clarity of information will be instrumental in helping them to survive the downturn and prepare for the upturn”.

There is not much you can say to that, is there?

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