Expanding Section: The Oracle Support Question

The support question regarding Oracle (that is should companies continue with Oracle support or look for other alternatives including taking support internal), and applies more to companies that use the Oracle database rather than the database along with the applications.

 
Database Version
Overpayment Multiples of Initial Net License Charge
% of Oracle DB Customers
2Oracle 12c
N/A
3Oracle 11g
2.75
31%
4Oracle 10g
3.75
29%
5Oracle9i
4.25
21%
6Oracle 8i
4.75
13%

The Multiple of the Initial License Price Paid

This table shows the multiple of the initial license price that has been estimated to be paid by customers since the software was purchased, and what percentage of the customers (roughly speaking) have paid this support money to Oracle over the years. For Oracle 10g, a typical customer would have paid 3.75 times the license cost in support if they purchased the database version around the release of the software in 2003.

There are two factors which would reduce this multiple, and this is the deployment of 3rd party support and the second being companies that bring Oracle support internal.

  • There is some leakage of support payment. “Leakage” is the loss of support revenues to Oracle through companies pulling support internal or using 3rd party support. However, even the largest 3rd party support company, Rimini Street, has revenues of less than $250 million per year. While Oracle support business is roughly $18 billion per year. Although it should be noted that as Rimini Street prices its support at either 1/2 or less than 1/2 of what Oracle charges, each dollar of Oracle support that goes to Rimini Street (or other 3rd party support providers) cuts Oracle’s support revenue by over 2x the revenue of the 3rd party provider. However, we estimate that while Rimini Street provides support for other vendors that at least 80% of its revenues are from Oracle support.
  • There are other 3rd party support companies of course, but all of them significantly smaller, it is difficult to see third-party support combined with bringing support internal reducing Oracle’s support revenue by even $1.75 billion per year.

Let us review a comparison table.

Estimated Leakage From Oracle Support

 
Support Revenue Consumer
Support Revenues
Percentage of Total
1Oracle Yearly Support Revenues
$18 Billion
91%
2Estimated Leakage to 3rd Party Support and Support Brought Internal
>$1.75 Billion
9%

If this estimate is roughly correct, then Oracle still has at least 91% of the overall support market for Oracle support. Oracle does little to improve its acquired applications, and Oracle customers are not purchasing the most recent versions of the Oracle database.

This means that every year that passes, Oracle Support becomes an increasingly wasteful proposition. (as evidenced by Oracle’s 94% support margin. That is support is being paid on items where the bulk of development is at least 10 years old.

Any software vendor would love to collect support revenues on stable old applications into perpetuity. However, customers are increasingly becoming conscious of this waste.

The graphic above is from Rimini Street, based upon a survey of Oracle customers. Rimini Street competes against Oracle, and they compete on cost as well as support quality. So one might say that Rimini Street has a bias in presenting a particular storyline. However, these results match up with our observations of Oracle customers. There is little doubt in our mind that costs are at the top of mind of Oracle customers. 

This is why AWS is so threatening to Oracle. AWS is in a sense providing better support than Oracle — for their database (that is not the Oracle applications).