MFG 2.0

When Is Maintenance Not Maintenance? Ask Oracle And SAP.

InformationWeek's Bob Evans has an interesting column out recently where he takes Oracle CEO Larry Ellison to task for continuing to refer to his company's 22% annual fee as "maintenance" even though it's been widely reported that it is nothing of the kind, and is, in fact, somewhat counterintuitive (if any other product required that high a maintenance rate, would it sell?)

Evans tells Ellison that "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,'" but implores him "whether or not you decide to change the fee structure, change the terminology -- instead of "maintenance fees", call them "innovation and development funds."

To Ellison's defense, he's obviously not the only guilty party in the enterprise software sphere. I'd argue that, in the ever-acquisitive Oracle's case (they've acquired 50 companies in the last 4 years alone), they should probably label their maintenance fees "M&A capital raising activities."

See also: Oracle's Insatiable Binge-Eating Business Model

TAGS: Innovation
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