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January 30, 2012
By Scott Braden
RCP Magazine has posted a very handy update to Microsoft’s upcoming product release plans. This is of special interest to customers who are planning Enterprise Agreement (EA) or Software Assurance (SA) renewals in 2012.
http://rcpmag.com/articles/2011/02/01/the-2011-microsoft-product-roadmap.aspx
Note that Windows 8, Office 15, Windows Server8 , and Exchange 15 release dates have slipped from the previous guidance – now expecting late in 2012 or early 2013.
My bet is that Microsoft will make sure that Windows 8 releases in time for Christmas. This means that we should start seeing PC OEMs announcing coupons and/or free upgrade guarantees for customers who buy Windows 7 machines, sometime in the 4th quarter. I’ll be watching for Microsoft’s announcements regarding enterprise customer options for continuing to use Windows 7 in 2013.
If your Microsoft Agreement(s) are expiring / renewing in 2012, get in touch with NET(net) now to ensure you have the latest market intelligence and optimization support for this key area of IT spending.
January 30, 2012
By Steven Zolman
For a while, it appeared that SAP was doomed. Oracle was winning a high percentage of the deals, and was seen as the innovator, promoting vertically integrated technology solutions that combined hardware, software and services, while SAP was often viewed as being left behind, trying to bilk maintenance out of its legacy customers. There was renewed talk of an SAP acquisition by IBM, or maybe HP, or perhaps Microsoft, or even, God forbid, Oracle.
SAP has seemingly stabilized, however, and we believe will actually show some good results in Q4. We believe SAP licensing revenue will be up around 15%, and profit margins will improve, to hover around 40%. In addition, SAP seems to be riding the industry “Big Data” wave, as some of the core growth areas for SAP have shown some promise. As an example, HANA (in-memory database) sales are up, and SAP’s plans to get more of its applications into more hands of more users through mobility (SAP’s primary reason for acquiring Sybase) also appears to be gaining traction.
We expect SAP’s Q4 and 2011 numbers to be strong in the Americas, and in the APJ region. EMEA remains a concern, but we expect solid performance in major markets like Germany, the UK, and France.
In 2012, we will be keeping a close eye on (i) SAP’s continuing performance in ERP in both new license sales, and also in its legacy maintenance sales, (ii) SAP’s continuing performance with its Sybase acquisition, and specifically how SAP can gain market acceptance with in-memory computing and mobility, (iii) how SAP’s Business Objects acquisition performs in both SAP and non-SAP shops, and (iv) how SAP can parlay its most recent acquisition of SuccessFactors into more success with employee performance management.
All in all, SAP remains a difficult supplier for most of our Clients to deal with primarily because of its poor account management, premium pricing, restrictive terms and conditions, inadequate levels of service and support, and a lack of effective partnership with Client executives. Perhaps 2012 will bring positive developments in these areas as SAP aims to get some of its mojo back.
January 30, 2012
By Steven Zolman
At the end of November, 2011, Oracle reported its Fiscal Q2 results, and for only the 2nd time in the last 5 years, reported a sequential reduction in annual maintenance income.
See chart below:
This is a significant development, mostly because of how Oracle charges for maintenance. When Oracle sells software licenses, it also includes the first year of annual maintenance at 22% of the net license value – and there is no option to ‘unbundle’ and not pay the first year maintenance charge. So, if Oracle sells $2 billion of software in a given quarter (which it roughly did in Q2 of Fiscal Year 2012), that means Oracle would also gain $440M in annual annuity income in the form of ongoing maintenance services and support revenue. To demonstrate a sequential reduction of nearly $40 million in the quarter (which they also roughly did), means they would have actually had to have lost annual annuity income of more than $480 million in the quarter (12 times what the $40 million sequential reduction illustrates). This is astounding actually, when you consider the near tyrannical policies Oracle enforces in its annual maintenance processing, making it all but impossible for clients to reduce their payment obligations, short of outright cancellation of all maintenance on all products that share an order (or have been bound together). If that trend continued for four quarters, Oracle would lose nearly $2 billion, half of its existing book of maintenance business.
The other very significant concern for Oracle is that maintenance revenue disproportionately counts towards profitability. Measured as a business unit, Oracle reports maintenance profit margins in the 96% range. Of additional concern is that Oracle maintenance was down across the board, and in both hardware and software.
As we have been working with clients in 2011, we have seen very significant scrutiny on annual maintenance costs, mostly as our clients continue to focus on ways to reduce costs, while concurrently evaluating newer technology choices like SaaS and Cloud Computing, displacing aging legacy applications that are Oracle centric. Another factor that needs to be considered is the continual pressure from firms like Rimini Street and others who offer third party support services at advertised rates of 50% off the cost of Oracle.
With threats from SaaS providers like Workday, taking share from the old legacy PeopleSoft base, and Salesforce.com, taking share from the old legacy Siebel base, it’s not entirely surprising to see Oracle maintenance stream diminish as Clients modernize their approach to leverage SaaS and Cloud Computing. In 2012, we will be watching this trend closely, and monitoring the already draconian Oracle licensing rules and company policies regarding the (in)ability for Clients to dial their maintenance costs to meet the value they are receiving. The forecast is grim. NET(net) expects more tyrannical policies to emerge as Oracle tries desperately to hold on to its extremely profitable maintenance revenue – and disruptive suppliers concurrently try to chip away at this behemoth funding engine.
