Open letter to Ellison critical of Oracle strategy

TechWeb Global CIO writer Bob Evans recently published an open letter to Oracle CEO Larry Ellison. The heart of the note illustrates the point that Oracle's current strategy remains a burden to customers and that they are (finally) starting to get fed up.

The issue that needs your fresh thinking and attention in today's brutal economic climate is the one-size-fits-all, nonnegotiable 22 percent annual maintenance fee Oracle charges your customers.

As you well know, those customers are desperately trying to cut costs and conserve cash, and are exploring every possible option for doing so. You can help those customers very directly while also advancing Oracle's cause in a variety of ways by being willing to modify your stance on that single-tier, unmodifiable policy.

The author primarily takes issue with maintenance fees, but the underlying theme is that users have already paid for the software and that they aren't seeing much value in what is described as "maintenance." And Oracle doesn't seem to care a whole lot about it.

Mr. Ellison, it's easy to see why you like the current system, where someone pays, for example, $4,000,000 for a software license and then pays you $880,000 every year for "maintenance." And maybe CIOs will continue to find that's a fair exchange of value. But maybe they won't--as you know better than just about anyone, the IT industry is an archetype of creative destruction, where faster/better/cheaper alternatives relentlessly stalk, attack, and kill older/slower/more-expensive models.

Perhaps the model you and Charles Phillips and the entire Oracle global team have built is so extraordinarily singular that it will endure forever and remain unassailable from the forces that have ground down every previous eternal model in the technology business. But maybe not.

Definitely worth a read--this thread of "long-gone customer value" is what open source and software-as-a-service companies thrive on. The big vendor backlash is just starting.

[slecalvez]

I agree with what Bob Evansis saying. Charging 22%, even 20 or 18% as other software vendors is too much after a certain license amount. I think M&S should be capped at no more than 100,000 USD a year, and percentages should be variable depending on the initial size of the deal.