SAP, Oracle in services price war

We wondered what SAP had in mind when it acquired TomorrowNow, a provider of services for PeopleSoft's business applications, back in January. Now we know: Start a services price war with Oracle.

SAP said on Monday that it has extended a services program to Oracle customers running PeopleSoft and J.D. Edwards applications. PeopleSoft bought J.D. Edwards in 2003; Oracle in turn purchased PeopleSoft last December.

SAP says it is "launching an intensive customer recruitment campaign, offering significantly lower cost maintenance alternatives to Oracle customers running PSFT / JDE solutions."

For SAP, the plan could help generate additional revenue from companies using PeopleSoft and J.D. Edwards software who fear that Oracle will discontinue, or "sunset" those programs.

And since services and maintenance revenues are becoming increasingly important to big software companies--Oracle's maintenance revenue easily outpaced new license fees last quarter--SAP's plan could hit Oracle where it hurts.

For Oracle, part of the allure of the PeopleSoft deal was the mountain of services fees paid by customers. Now, Oracle will have to fend off its largest rival if it wants to keep that money flowing its way.

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