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Are price hikes in store for Sun software support?
- — 24 April, 2009 03:21
Oracle's pending purchase of Sun Microsystems may not have an immediate effect on what customers currently pay to use Sun software, but changes are likely coming, observers said this week.
Sun's open-source software strategy has included offering applications like the MySQL database at no cost, but customers who want official support must buy a maintenance contract.
That's a sharp contrast to Oracle, which, in the practice of proprietary vendors, imposes license fees plus an annual support charge, generally 22 percent of total license costs.
But it's not likely that Oracle will immediately ratchet up Sun support contract-pricing wholesale, said Redmonk analyst Stephen O'Grady.
"I would imagine that the pricing changes, if any, will happen on a product-by-product basis," he said. "Oracle is very good at understanding when it has the upper hand in terms of a product's importance."
Oracle, which declined to comment for this article, imposed license price increases of 15 percent to 20 percent last year, just as the global recession was escalating. "They can get away with that because it's going to be cheaper for customers to continue running [Oracle] than go through the pain of migration," O'Grady said.
In contrast, Sun customers may not have the "same level of dependence" on Sun's products, which also include identity management and the Glassfish application server. "With the exception of MySQL, none of the products are really popular enough where they can dictate pricing to the market," he said.
Forrester Research analyst Ray Wang does not expect Oracle to quickly raise prices either, in part because Sun customers have more options.
"If they do make changes, they're going to have to show more value. Someone else can provide open-source maintenance as well," he said.
One such company is OpenLogic, which provides support for a range of open-source software. OpenLogic's phone has been ringing steadily with calls from concerned customers since the Sun-Oracle deal was announced Monday, said CEO Steven Grandchamp.
Grandchamp predicted there will be price hikes in store for Sun customers eventually: "What typically happens is that once the [contract] renewal notice goes out, the price tends to go up."
Oracle's own sales force may also influence the cost of competing Sun products, according to Kim Weins, senior vice president of marketing for OpenLogic.
For example, if a sales person is eventually able to market both MySQL and Oracle's database, some customers may want to save money by downgrading to MySQL, she said. "When that happens, the sales force starts screaming." To compensate, Oracle could raise Sun pricing, she said.
Other observers also expect Sun customers to see cost increases eventually.
"What we find in practice is that Oracle likes to spend a few months after acquisitions letting the smoke clear a bit, and gives clients of that software a false sense of security," said Eliot Arlo Colon, president of Miro Consulting, a Fords, New Jersey, firm that consults on Oracle license negotiations.
But soon, the "honeymoon period" ends, often in coordination with customer contract renewals, he said.
Even if Oracle does not raise the list price of Sun support services, customers can expect the vendor to be tougher on compliance, according to Colon. For example, customers who haven't bought a support contract for every machine they have running MySQL may have to dig out their wallets.
"It's not a very well-kept secret that Sun has a very loosey-goosey audit practice. We find clients who are blatantly out of compliance," he said. "Sales reps for Sun may even know it, but figure that as long as [customers are] buying something, they leave it alone. I don't think you're going to see the same thing from Oracle."
Sun has "taken an enterprise philosophy of, 'We're more client-friendly than our competition,'" Colon added. "With that tack, they've not done justice to their client base. All these companies who have had the 'wink-wink, you're fine?' They're going to be thrown to the lions."
However, "the fortunate thing is, it's also well-known that Oracle is a negotiator," he said. "They're very strict, very tough, but also negotiate much more often and creatively than other companies of their size."