Another advantage to open source.
07:40 Rebellious customers may cut into profits at big software firms - WSJ
The WSJ reports corporate and government software customers are rebelling against the rising annual "maintenance" fees that co's such as PeopleSoft, Oracle and SAP charge for updates, bug fixes and access to "help desk" technicians to keep systems running. The revolt has gathered strength as the software co's, facing flat or falling sales of new software, have sought to derive more rev from existing customers. They often impose steep price increases for maintenance at the expiration of initial, often heavily discounted, service agreements. These maintenance contracts carry operating profit margins of 70% or more. Those juicy margins give outside support providers the opportunity to undercut the major vendors and gain a share of the software industry's most profitable rev stream. That trend ultimately could undermine not only the rationale for the proposed takeover of PeopleSoft, but also hurt Oracle's own business, which increasingly is reliant on the approximately $4.5 bln the co collects in annual maintenance payments. One outside support provider is TomorrowNow, which touts its service as a "major medical" policy, providing critical fixes and updates and a responsive help desk, but sparing customers the hassles of installing a constant stream of more minor changes. TomorrowNow avoids possible legal complications by exploiting a clause in PeopleSoft's software licenses that allows outside consultants to modify customers' code. The co claims to have snagged more than 70 customers. While that is a tiny fraction of PeopleSoft's more than 4,500 users, TomorrowNow says it has won business from such major accounts as Adolph Coors, Safeway and Lockheed Martin. According to the article, some TomorrowNow price quotes are only 30% of what PeopleSoft is charging.
