Infor chases customer for fees on 20-year old software

Times must really be tough. According to a lawsuit filed by tool maker Vaughan & Bushnell, Infor is demanding that the company pay up on maintenance fees for software it first purchased in 1987.

According to Chris Kanaracus at IDG News Service:

Vaughan & Bushnell Manufacturing of Hebron, Illinois, paid SSA a one-time US$87,000 fee for the nine-module enterprise resource planning suite and used it "unmolested" for more than 20 years, according to a complaint the manufacturer filed earlier this month in US District Court, Northern District of Illinois, Eastern Division.

Vaughan & Bushnell, which makes hammers, pry bars and other hand tools, also received a software upgrade in October 1987. But since then, the company received no maintenance or installed upgrades from SSA and did not hear from Infor until last July, the complaint states.

The current dispute revolves around the hardware being used to run the software.

Initially, Vaughan & Bushnell installed the suite on an IBM System/38 minicomputer, which it replaced in 1993 with an AS/400. In 1999, it upgraded once more, to an IBM AS/400E, according to the filing.

Throughout this whole period, Vaughan & Bushnell paid nothing to Infor, claiming that its license agreement didn't require it to pay for moving the software (at the time, known as BPCS) to replacement hardware.

I contacted Infor for clarification on these questions. Although the company's policy is to not comment on active litigation matters, a spokesman said that generally, Infor's policies are not different than its competitors, other software vendors and other companies who have obligations to maintain and enforce their intellectual property. "Infor routinely canvasses its customers in order to validate license compliance," he wrote. "Every so often, Infor and a customer dispute whether there is a noncompliance."

He continued, "Infor can confirm that its practice of customer compliance validation has been ongoing for multiple years and is not a recent development." He also referred me to Infor's license management policy, which is publicly posted on its website.

My take: The story doesn't address some interesting questions. Was Vaughan & Bushnell's only "upgrade" a hardware upgrade? If the company was truly in violation of its original license agreement, why did SSA and now Infor wait 16 years before trying to collect?

Regardless of the details, it is noteworthy that Infor is chasing a 20 year old customer for an alleged violation that occurred in 1993. I had not heard of this case prior to a Spectator reader (another Infor customer) alerting me to the IDG article in Network World. It would be interesting to know if this is an isolated case, or whether Infor is chasing other old customers of its predecessor companies for back maintenance fees.

Infor customers are invited to contact me or leave a comment on this matter. I honor all requests for confidentiality.

Update, March 13: Jeff Gordon, an expert on software license contracts, has a great post analyzing this case. He believes that Vaughan & Bushnell has a 90% chance of prevailing.

Related posts
Infor reassures customers of financial viability

Big win for open source ERP project Compiere

The Compiere website has a short blog post announcing a major win for the open source ERP project in France:

Compiere’s largest new customer, French-based La Poste recently announced their selection of Compiere open source ERP solution. La Poste is a global postal processing organization with 45 million customers, 300,000 employees and US $27B in revenue. With the help of Compiere Gold Partner Axilom, La Poste will be deploying Compiere Professional Edition within a business-to-business division to replace existing sales, purchasing, inventory, and payment processing systems.

The brevity of the post leaves a lot of questions unanswered. How many of La Poste's employees will use Compiere? What drove La Poste to seek an open source solutions? Will La Poste be enhancing or extending Compiere (flexibility being one of the key advantages of open source)? Were any closed-source ERP systems considered?

There's a press release from Axilom, the Compiere partner in France that sold the deal. Unfortunately, my high school French is not up to the task. Here is Google's translation of the page, which helps a little.

Some observers have been speculating that open source solutions might benefit from the current economic recession. Compiere's win at La Poste would appear to be evidence in favor of this view.

Related posts
Open source ERP and CRM carry strong ROI
Total cost study for an open source ERP project
Compiere's open source ERP business model and growth plans
Open source ERP gaining adherents
Key advantage of open source is NOT cost savings
Open source: turning software sales and marketing upside down

Why the recession is good for Oracle

Ben Worthen in the Wall Street Journal (subscription required) has a long article today on Oracle's program to buy up other software companies while prices are cheap.

While most American corporations pinch pennies, Oracle Corp. is quietly going on a shopping spree.

The software giant completed 10 acquisitions in the past year, ranging from a maker of insurance-policy-writing tools, to a designer of "plan-o-gram" software used by stores to maximize their use of shelf space. This month it bought mValent Inc., a tiny maker of software that helps configure other software.

These deals, whose terms haven't been reported previously, put Oracle in a small club of cash-rich companies bargain-hunting amid the worst economy in a generation. It's a buyer's market: As traditional sources of investment and cash get scarcer -- including, of course, paying customers -- even some companies with high-quality products have turned into desperate sellers.

Oracle's first moves earlier this decade were to buy large software companies, such as Peoplesoft and Siebel. But now it has virtually exhausted these opportunities and is turning its attention to acquiring smaller software firms that give it strong niche functionality.

In 2008, Oracle bought mValent (configuration management), Tacit Software (collaboration), RuleBurst Holdings (social service agencies), Primavera (project management), Advanced Visual Tech (retail space planning), ClearApp (application management), Global Knowledge Software (eLearning), Skywire Solutions (document management) , AdminServer (insurance industry), and Empirix (voice application testing and monitoring).

My take: Even though the current recession has affected Oracle's bottom line--it reported a 1% drop in net income, its first decline in three years--Oracle's cash hoard is allowing it to scoop up software assets at prices far, far below what it would have to pay to develop them in-house. Of course, Oracle's "buy instead of build" strategy is also a lot faster and comes with the benefit of buying new customers as well as new products.

In this respect, Oracle's strategy in this recession turns out to be better than SAP's, which still largely develops most of its new products in-house. (It's acquisition of Business Objects is a major exception, of course.)

Earlier this decade, Larry Ellison predicted a major consolidation among business software developers, and he moved Oracle in a direction to take advantage of this trend. It turns out he was right and Oracle is benefiting as a result.

Update, Feb 20: Vinnie has a -- ahem -- somewhat more negative view of Oracle's acquisition program.

Oracle, in my opinion, has forgotten how to develop code. Its top executives are deal makers, not technology visionaries. Worse, when it comes to their acquisitions, they cannot retain or easily replace the entrepreneurial talent. Every person who departs Oracle comments about the mass confusion that comes with such a rapid accumulation of software IP - and Ben touches on that also in his article.

The rapid pace of acquisitions has also had a significant impact on Oracle support. Customers report frequent and confusing changes to Oracle’s support policies as so many products go in and out of stages of “lifetime support”. Little has been done to rationalize support across products – other than of course, raise maintenance to 22%

Karen Tillman, VP for Corporate Communications at Oracle, to her credit, attempts a response in the comments area of Vinnie's post.

Update, Feb. 23: Dennis Howlett picks up on Vinnie's commentary and Oracle's response to Vinnie. Dennis agrees that Oracle's acquisition program may be good for Oracle but it hasn't delivered much in terms of innovation. He concludes:

Innovation can have many definitions but in the software world in which I live it means presenting something that provides me with a better, more cost effective and/or revenue enhancing way of getting things done. In a recessionary economy that’s an absolute must I hear time and again. How then can Oracle justify its place at the buyer’s table if all it can offer is a smorgasbord of acquired functionality, much of which is tuck in or required to flesh out incomplete offerings, ageing apps plus something sexy in CRM? Oh yes - and with a 22% maintenance price tag?

Update, Feb 23: Josh Greenbaum has a somewhat more positive view of Oracle's delivery of innovation. But in the comments section, Vinnie is having none of it.

Update, Feb 24. In a followup post, Vinnie clarifies that the issue is not just Oracle's delivery of innovation, but also a lack of "continuous improvement in its base products and services." I agree with Vinnie on this point. Most buyers that I deal with are not clamoring for "innovation" but would be satisfied with software that performs according to its specifications, maintenance releases that fix more bugs than they introduce, and ongoing support that is helpful and responsive. All at a price that doesn't require them to essentially pay for the software twice over a five year period.

Related posts
Oracle acquires leader in project management systems

2009 IT Salary Report now online

Over at Computer Economics, we've just published our new 2009 IT Salary Report, which provides 2009 base salaries for 70 specific IT job titles in 73 U.S. metropolitan areas.

The bad news: IT salary growth is slowing. The good news: IT salaries are still rising, even in the midst of recession.

There's a free executive summary available. The full 2009 IT Salary Report is available for purchase.

ERP bright spot: IFS revenue rises

In news running counter to the general trend these days, IFS is reporting a 9% rise in Q4 revenue. Managing Automation reports:

The positive results in a gloomy economic environment reflected IFS’ ongoing move away from consumer-facing industries, such as automotive and electronics. About 70% to 80% of new customers for the year came from defense, infrastructure, utilities, and what the company calls the "EPCI" segment: engineering, procurement, construction, and installation.

It wasn't all good news. License revenue declined 2% in Q4, although it was more than offset by a 14% increase in maintenance and support revenue and an 11% increase in consulting fees.

In terms of worldwide results, revenue was up 11% in EMEA and up 9% in the Americas. The US growth is noteworthy, as IFS has suffered for years from a lack of name recognition here. (Case in point: I mentioned IFS to a sales manager from a major vendor recently and was met with a blank stare).

Sales in the rest of the world were down about 5%.

My take: IFS is in a somewhat unique position, as its target markets happen to be sectors such as aerospace and defense, energy, and utilities, that are least affected--and some may argue, benefiting--in the current recession. I also suspect that for some buyers, the idea of being able to buy enterprise systems from someone other than SAP and Oracle is also appealing.

In any event, it's good news for IFS.

Update, Feb. 20: Here is IFS CEO Alastair Sorbie interviewed on CNBC (Europe) on how IFS has grown by shifting focus to project-based manufacturing sectors.

SAP and third-party maintenance: good for me but not for thee

This is rich. Ray Wang just wrote, on Twitter:

Hearing from SAP customers that there are new clauses that will force customers to commit to no Third Party Maintenance.

He then followed up with two more tweets:

Large ERP vendors requiring companies to confirm they are not receiving support services except from that vendor. More than 1 vendor.

Suggesting to customers not sign away any third party maintenance rights in new contracts. This is uncompetitive!

SAP's (and other vendors) audacity in this, if true, is at least three-fold:

• SAP itself, until recently, has been delivering third-party maintenance for Oracle customers through SAP's TomorrowNow unit. So, apparently, SAP thinks third-party maintenance is a good idea when SAP does it for a competitor's products but not when others do it for SAP's products.
  
  
• If SAP's maintenance and support offerings are such a great value, as SAP has been saying lately, why does it feel it needs to contractually bind its customers from using third-party maintenance?
  
  
• Such contractual terms restrict fair competition. If a third-party maintenance provider is misappropriating a vendor's IP rights, as Oracle is accusing SAP of doing, SAP can legally pursue that service provider. Limiting the customer's choice is clearly against free market principles.
  

Many observers are concerned that the high-end ERP market is already a duopoly. Attempting to restrict fair competition in this way just confirms our worst fears about large vendors' intentions. I continue to believe that these actions should be investigated by the U.S. Department of Justice on the grounds of antitrust.

I thought SAP did a good job in its Business Suite 7 launch yesterday to position its products for the current economic climate. If what Ray wrote is true, SAP is making a big blunder and just lost whatever positive PR value it got from yesterday's event, in my book.

I would echo Ray's advice. Any prospects currently or soon-to-be in negotiations with SAP should be sure that they are not signing away their rights to use third parties in support of SAP products.

Lot's of chatter on Twitter about this as I write. I'll post updates as new information emerges.

Update: Dennis Howlett has a deeper analysis on why SAP may be feeling the need to restrict third-party maintenance. In a nutshell, the days of mega-software deals are over, and to maintain revenues it needs to transform into a service business. Third-party maintenance threatens that strategy. But read Dennis's entire post, as he has much more worth thinking about.

Update: James Governor points to an article in German indicating that the Swiss government is looking into possible actions by SAP to restrict competition. I'm relying on a Google translation of the article, however, and the cause of the inquiry is not entirely clear to me. Perhaps a German-speaker can help.

Update, Feb. 10. Ray Wang now gives more detailed information regarding software vendors attempting to restrict third-party maintenance rights, along with his recommendations for buyers.

Update, Feb 12. Just found this single post, referencing an SAP denial that it is attempting to use contracts to restrict customers from using third-party maintenance. However, there is no reference or link to a statement to this effect by SAP--just an assertion that SAP denies doing so. If any customers of SAP can shed light on this subject, let me now.

Related posts
SAP maintenance fees: where is the value?
SAP under the spotlight for "broken promises"
Mad as hell: backlash brewing against SAP maintenance fee hike
Oracle increases accusations in SAP lawsuit
SAP puts TomorrowNow out of its misery
Legal basis for third-party ERP support industry
Oracle wants to broaden lawsuit against SAP and TomorrowNow

SAP Business Suite 7: selling value in tough times

SAP had a launch event in New York this morning to present the latest incarnation of its enterprise systems: Business Suite 7.

SAP has been doing a good job of opening events like this to a virtual audience as well as to those that can attend live. I was giving a webcast at the same time and was not able to take part. However, a number of other bloggers tuned in and have already put together some excellent analysis of what Business Suite 7 (BS7) is about.

One thing that BS7 does not appear to be: a major functionality upgrade. SAP already has more functionality available off-the-shelf than any one company can implement. There used to be a time when you could rank vendors against functional requirements and come up with very different profiles. Although every system has its strengths, especially when it comes to industry-specific requirements, the buyer's decision today often comes down to factors other than functionality. These other factors are what SAP appears to be addressing with BS7.

These factors include:

• Ease of implementation and upgrades: SAP is emphasizing a modular approach to instead of the proverbial big-bang. Although you could always purchase SAP systems on a modular basis, SAP used to push comprehensive sales to establish as large a footprint as possible within the client's operation. Such an approach doesn't fit the economic times, however, so SAP is emphasizing its ability to work in smaller bites using its service-oriented architecture (Netweaver).
  
  Although new functionality does not appear to be the main focus of BS7, SAP did announce over 150 functional enhancements today. However, they are being rolled out as "enhancement packages," which customers can implement selectively--again, forgoing the need for a big bang upgrade.
  
• Value scenarios. Again, fitting in with these recessionary times, SAP is emphazing short term ROI instead of pitching its products as a long-term strategic platform. It coined the phrase "value scenarios" to denote "end-to-end business processes that focus on industry-specific outcomes and can be implemented incrementally as the customer has need. Examples given include integrated product development for manufacturing, collaborative demand and supply planning for high-tech and consumer product companies, and integrated sourcing and procurement for all industries.
  
• Integrated analytics. SAP is incorporating select analytics capabilities of its BusinessObjects acquisition into BS7. Business Intelligence systems are frequently treated as analytics outside of core transactional systems. As such, integration can be a major effort taking years of effort. By incorporating some BI capabilities directly into BS7, SAP appears to be addressing the need of decision makers to have analytics as an earlier deliverable.

As I've indicated, SAP's emphasis in announcing BS7 fits with the times. Our annual IT spending survey now underway at Computer Economics is showing a major cutback in IT capital spending this year. This hits big-ticket vendors, such as SAP, hard. SAP is right to emphasis investment in smaller bites, measurable short-term ROI, and the needs of decision makers. Whether buyers will be willing to open their wallets, even with this sort of pitch, remains to be seen.

Other bloggers, who attended the event, have more insight on what SAP's announcement means. Larry Dignan gives a good overview on the BS7 modular approach, but views it more as an SAP sales strategy than new technology that SAP didn't already have. He also has another post where he expresses his doubts that SAP is done with scary upgrades" and "sleepless night projects. Dennis Howlett gives his take on SAP's announcement, including a description of the dialog taking place on Twitter between analysts as the presentation took place. Read all of these reports for a fuller picture, as they contain more insights than I am able to pull together here.

For the official view from SAP, read SAP's press release on BS7, which contains quite a bit of detail on the new offering.

Update: Brian Sommer reports that SAP upgrades are indeed faster on BS7, based on experience of one early adopter:

An earlier meeting with a global CIO confirmed the much shortened timeframes and costs possible with these new BS7 capabilities. This CIO verified that 1-3 month timeframes for new enhancement rollouts are indeed possible. Some functions though (e.g., data conversion, data quality, change management, etc.) may drag out rollout timeframes.

More from Brian Sommer here, expressing some skepticism on SAP's claims regarding the use of BS7 to achieve "process excellence."

Update: Vinnie Mirchandani was in the live presentation and gives a great account of his direct interaction with SAP's Co-CEO Leo Apotheker.

Update: Larry Dignan has an analysis of Apotheker's Q&A session with bloggers, which he attended. Interesting read.

Related posts
SAP layoffs, January, 2009
SAP's Leo Apotheker on Charlie Rose

QAD layoffs: February, 2009

A Spectator reader alerted me to a layoff in progress at QAD. A quick check found that QAD has indeed filed a form 8-K announcing several cost cutting actions, including a layoff.

The action will impact approximately 125 employees, or 8% of the firm's headcount worldwide, in all functional areas.

The move by QAD is not surprising, seeing that similar actions have been or are being taken by many of its competitors, including Oracle, SAP, Infor, Lawson, and Epicor. QAD is a well-established player, and in these tough times its maintenance and support revenues provide a needed cushion for declining new license sales. However, the automotive sector is a particular niche for QAD, and not a robust market to be selling into these days.

I'm waiting for QAD to respond to a request for further information. In the meantime, if you have any insights into the situation, please email me or leave a comment on this post.