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June 27, 2008
Their logic baffles me...
This morning on the BBC I saw an interview of SAP's CEO, Henning Kagermann. He was expressing the fact that in today's tough economy, budgets were cut, deals were taking longer, and many companies were pushing back their investment plans. Of course as a vendor of super expensive infrastructure software, SAP is taking a big hit.
In order to compensate for this decrease in initial purchases, SAP is rising maintenance prices. I guess they did the math: less clients x higher cost = constant revenue.
At the same time, Oracle announces both a price hike, as described by Gavin Clarke in The Register, and record quarterly results - the latter making sense given their acquisition spree of the past 3 years and all the cost (and talent) cutting they did in acquired companies.
But where is the logic in all this? As Bertrand said in this post, there probably isn't any - except that customers are locked in! Pretty much like Air France 20 years ago, which was in a situation of monopoly on the French domestic market and could dictate their prices, until low cost airlines such as Easyjet or Ryanair and the TGV came along. Check Air France's promotional costs today - at least for the destinations where they have competitors: they are pretty compelling. But it took Air France quite some time to adjust, and a few years ago they were not in such a good shape. The same holds true in the US, look at AA, UA, or DL and how they reacted to JetBlue or SouthWest. Or how they managed to crush the new low-cost, all-business-class airlines flying from London to NY, but this is another story...
So are SAP and Oracle the legacy airlines of software? And in this case, are open source vendors the low cost carriers? And will legacy vendors adjust some day, or get crushed by open source? Or will they crush open source? I don't think either model will drive the other one out of business. A balance will establish itself. But the more proprietary vendors try to squeeze the last cent out of their clients, the more this balance will tip toward open source.
So, Herr Kagermann, here is a suggestion for you. Start to charge your US customers in Euros, you revenue will jump by 60% overnight. Why? Because you can!
And Larry, one for you too. Index the cost of your software on the price of the oil barrel. Who's going complain? You have them by the balls!
And as an open source vendor, I won't complain either, you can rest assured.
Posted by Yves de Montcheuil at June 27, 2008 2:00 AM
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