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Fed up with spiraling enterprise software licensing fees and maintenance costs? It could be quite some time before you see any relief, depending on the software and IT services strategy that your organization is willing and able to take.
Last week, BusinessWeek published an article about how software industry consolidation over the past few years has led some customers to complain about reduced competition, vendor lock-in and spiraling prices. The article is focused on Oracle and how some customers feel like they’re trapped into using its products.
It’s a big pain point for many enterprise CIOs, particularly as commercial options for ERP, CRM and other types of business software have dwindled in recent years. But it’s not a new trend by any means. Ten to fifteen years ago, enterprise CIOs were making similar complaints about the lack of competition among mainframe ISVs, or independent software vendors such as CA and BMC.
Besides, enterprise customers have been carping about Oracle’s strong-armed sales tactics for years. As Save Mart Supermarkets CIO James Sim points out in the BusinessWeek article, once an organization has committed to licensing some of Oracle’s products, it’s often too expensive to switch to an alternative provider.
That’s one of the many reasons why enterprise organizations won’t be making a wholesale switch to Software-as-a-Service (SaaS) offerings anytime soon. Sure, CIOs also have security concerns about placing sensitive and mission-critical organization information in the cloud. Plus, they worry about how to get proprietary data returned to them should they terminate an agreement with a SaaS provider.
But when you’re organization has a sizable investment in premise-based software and it’s a bear to transfer data and business processes to a completely different system, that makes it pretty tough to pull the trigger. Many CIOs are starting to dabble in SaaS and in the cloud with applications they feel are a good fit, but it will be a while before we see enterprises backing away from traditional premise-based licensing agreements on a grand scale.
Part of the reason for that is vendors such as Oracle have so much riding on the premise-based model. A big chunk of profits for enterprise software companies comes from recurring licensing and maintenance revenues. They make it tough for customers to opt out.
Of course, CIOs aren’t completely hamstrung by market constraints. A growing number of enterprise IT shops are taking advantage of open source computing options available to them, particularly as the open source market (and forks) have matured and CIOs are encouraged by the additional control this has provided them with their software and IT services strategies.
There’s no single answer to the software puzzle. Many CIOs opt for a hybrid approach which mixes in-house development with the use of hosted and premise-based third-party apps along with open source. But as enterprise vendors such as Oracle continue to put the squeeze on customers, CIOs will be pushed into exploring other options.
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