Sunday, November 21, 2010

Oracle applications customers: wedded bliss or battered wives?

The results of my Oracle Apps customer survey have just been published by Computer Economics, and I've been fielding calls from media representatives on the findings. The most common question: if customers are so unhappy with the quality and cost of Oracle apps support, why do they keep spending money with Oracle? Why do they stay in this relationship?

It's not an easy question to answer. But first, let's summarize several main findings of our study.

Three negatives for Oracle

The Computer Economics Media Alert and Research Byte provide a more complete description of the report. But let me point out three major negatives for Oracle in the findings:
  • Apps customers unhappy with Oracle support. There is no way to avoid the conclusion that there is tremendous customer dissatisfaction with the quality and cost of Oracle support. Specifically, 42% are dissatisfied with the quality, while 58% are dissatisfied with the cost. This is across the board for all products, including E-Business Suite users, but is especially pronounced among PeopleSoft customers. The respondent comments in this section are devastating.

  • Fusion apps not top-of-mind for Oracle customers. Oracle’s next-generation applications, dubbed Fusion Applications, are not on the radar for most customers, with only 10% planning to migrate to Fusion. There is substantial difference in migration plans, depending on the Oracle product currently installed.

  • Oracle apps customers not flocking to Sun hardware. Only 25% of Oracle application customers are currently users of Sun hardware, but among these customers, expectations for increasing support costs are high. Very few Oracle application customers have plans for Oracle’s new Exadata storage systems.
As I said, not good news for Oracle.

But most customers sticking with Oracle

At the same time, despite their dissatisfaction with Oracle support, their lack of interest in Fusion, and their complaints about Sun costs, only 25% of our respondents expect Oracle to have a smaller share of their IT budgets over the next three years. Another 37% indicated such factors as organic growth, purchase of additional Oracle applications, and standardization on Oracle technology would result in Oracle having an even larger share of their IT budgets. The remaining respondents judged Oracle’s share of their IT spending would be about the same in three years.

In other words, whatever their complaints, the majority of Oracle apps customers do not plan on changing course.

So why do customers stay?

This is the big question. If things are as bad as our respondents say they are, why aren't they moving en masse away from Oracle? We didn't specifically ask this question in our survey, but based on many of the comments, I can postulate three types of Oracle apps customers:
  1. Organizations that have standardized on Oracle products. These are like married couples in a committed loving relationship--they may have their squabbles from time to time, but their commitment is secure. These include died-in-the-wool "red stack" customers, those that have committed to do most new development on Oracle database and tools. Most of these customers are running E-Business Suite and have no intention of leaving. These are the ones that are most likely to be considering a migration to Fusion Apps, when they are generally available. These also include users of other Oracle applications, such as JD Edwards, PeopleSoft, and Siebel, who are generally satisfied and see no overriding reason to abandon them.

  2. Organizations that find breaking up hard to do. These are like wives that would like to divorce but decide to stick it out for the kids' sake. They are miserable, but they are going to hang in there, at least for the time being, as making a change is simply too difficult. Many customers have made substantial investments in their current Oracle systems, either in predecessor applications (e.g. PeopleSoft, JD Edwards, Siebel) that Oracle acquired, or in Oracle's own E-Business Suite. In many cases, it's not easy to replace these systems. The apps are deeply embedded as part of how business is done, or if enhancements have been built on top of these apps.

  3. Organizations that don't see an alternative. These are like wives that would like to be married to someone else, but don't see any attractive choices. These organizations are likely to be running Oracle's E-Business Suite. If they are of sufficient size and complexity, they may perceive that there is really only one other choice: SAP, another large Tier I vendor. From what they've heard--rightly or wrongly--that might not be a happy marriage either. And, they don't realize that in many cases, there are other choices, whether as a complete replacement for Oracle or as a partially replacement as part of a so-called two-tier ERP strategy.
Nevertheless, comments from respondents make it clear: a substantial minority of customers are planning to completely or partially replace Oracle in their applications portfolio. They are planning either for a total replacement of their existing apps, or to make new investments with technology from other vendors, around the edges, especially with SaaS solutions.

Make no mistake: Oracle has some great software and some great people. My own dealings with Oracle find that there are many outstanding professionals within the ranks of its applications business and its partners--smart folks that really care about serving customers.

For example, I know quite a bit about FDA requirements for electronic records and electronic signatures, and I find Oracle's approach with its E-Business Suite to be about the best I've seen from any vendor. Furthermore, by many accounts, its next-generation Fusion Apps raise the bar for ease of use, embedded analytics, and enterprise collaboration. I could list many other examples. As in any relationship--for many, being an Oracle customer has its good days and its bad days.

Chances squandered

Ultimately, though, it is hard to avoid the conclusion that Oracle is missing a major opportunity. By its own admission, Oracle makes at least 85% margin on its maintenance and support programs. In fact, it's nearly ALL profit. If Oracle would just take a 2% or 5% hit on that margin and invest it into improving the quality and reducing the cost of its support programs, it could probably reduce the level of complaints and engender tremendous good will among its installed base. Customer retention would not only increase, but it would open the door to additional purchases from these customers. And it would be a positive response to the threat of third-party maintenance.

Postscript: So, is Oracle planning any improvements in its service and support programs? It's possible. Oracle recently brought Charles Rozwat, a respected Oracle executive, back from an extended leave of absence, to head up its worldwide support organization, and he reports directly to co-President Mark Hurd. But I have no idea what changes may be planned. Oracle refused my repeated requests to make Rozwat--or anyone else--available to discuss these matters.

The full report, Go-Forward Strategies for Oracle Application Customers, is available for sale on the Computer Economics website.

Related posts

Oracle confirms: maintenance fees are virtually all profit
Oracle profits strong, thanks to your maintenance payments


Debra Lilley said...

Love the post and the discussion.

As you know I am very keen on Fusion Apps, but in your analogy this is the husband I want in the future, I am not ready to settle down yet.

The product is something to aspire to, and since miost customers have not yet seen it, I am not surprised , 10% have plans to move; but I think in a few years it will be a very different story.

I agree support is expensive but Oracle will say building Fusion and the rest of their R&D costs, and it has to paid somewhere.

I also thought but haven't checked that oracle always said chuck was taking time out, and not leaving, which to me means he was coming back. Is he going to improve service? I hope so, people never talk highly about any vendor's support, there is always room for improvement. But as I sit here typing I am following the Tweets from SAP user group meeting, and the numbers there are more depressing.

In fact SAP user group are asking for more collaboration with SAP. Currently Oracle are doing well there, on fusion Apps it has been excellent, and just last week Mark Hurd wrote to UKOUG telling us he is a big proponent of Oracle User Groups.

So my take,could always do better but not bad.

Frank Scavo said...

Hi Debra. I really appreciate your feedback, as someone who is heavily involved in UKOUG, and also someone who has worked with Fusion Apps up close.

However, I don't find comfort for Oracle in the fact that SAP customers may be even more dissatisfied.

Not to press the analogy of a marriage too far (which I'm sure I already have): but, the fact that someone else's husband is even worse is little consolation to the battered wife. The bar is set pretty low for customer service in the enterprise applications world.

As for support fees going toward Fusion development, you have a good point. But it does highlight the dilemma facing Oracle customers, especially those on Oracles "Apps Unlimited." If they are not planning to migrate to Fusion, or don't see the value, what exactly are they paying 22% maintenance fees for? Because it sure isn't going into improving their support experience.

Debra Lilley said...

I dont think I was trying to say that becuase SAP customers are unhappy it is OK, I was just trying to bring balance to the article.

It is also worth pointing out that Oracle licensing is perpetual and so development is important, and part of that licence model.

I do think Oracle have to do better and I think it is important that they listen to analysts like you and user groups and that we in turn represent their thoughts.

Support must improve but we need to be more specific as to what the issues are. I will look more closely at your findings and bring them up with Support at the Global User Group Summit.

Frank Scavo said...

I do understand. Actually, the open ended comments in the full report are actually quite detailed as to the specific complaints. Many have to do with the length of time it takes to get problems resolved, finding the right person, having to run meaningless diagnostics before support will talk, etc., etc.

I'm sure you have heard similar complaints from your user group members in the UK.