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Enterprise software's blue-light special: Now 70 percent off

Open source and other forces are driving enterprise software vendors into serious discounts...and possibly to ruin.

Are you the sucker still paying full price for Oracle, SAP, Microsoft, or other proprietary software? There's hope for you yet: Accenture is finding that such enterprise software vendors are increasingly giving as much as 70 percent off their list pricing to snag new customers, as reports. At that price, heck, proprietary software need only drop prices another 30 percent to meet the license cost of open-source software.

If you're an IT buyer, however, the real question is why you've been overpaying for software for so long. If an Oracle can afford to drop its price 70 percent to win your business today, why wasn't it doing so a few months ago?

Oracle, et al, increasingly make their money on maintenance fees, but to set those maintenance fees as high as possible they need high list pricing for their software. Even though customers are getting a discount on the price paid for their new enterprise resource planning system, they're paying full freight on maintenance.

From the article:

Accenture identified six forces affecting software vendors that have led to incoherent pricing strategies: industry maturity (slower growth, and increased customer sophistication); competition (from traditional and new players); acquisitions (which disrupt market strategies and offer integration headaches); new business models (SaaS, open source); new markets; and technology factors (such as service-oriented architecture, or SOA)...."As things stand now," the study concludes, "both enterprise software vendors and packaged applications are headed for significant problems."

Indeed. Far better for such buyers to get open-source software: no upfront license fee and low ongoing maintenance costs. More and more buyers are discovering open source as a key way to drive costs lower and improve innovation. Proprietary vendors? Well, let's just say they keep consolidating as a way to stave off the inevitable decline due to high costs of sales and an untenable business model.