Why Competition Matters, Oracle Edition

BusinessWeek has a story  Oracle Has Customers Over a Barrel (indeed!); what is extraordinary is how many customers have been willing to be quoted by name saying this like

“Once you’ve made a deal with the devil, it’s hard to get away,” says
James Sims, chief information officer of California grocer Save Mart
Supermarkets, who says he’s stuck with some Oracle products because
it’s too expensive to switch to alternatives. “They’re extorting us.
I’m very unhappy with them.” Oracle declined to comment for this
article.

 

and

This year, because of the recession, Alaska Air Group renegotiated
lower fees with every one of its software suppliers—except Oracle.
“They won’t budge on pricing, and we’re totally locked in,” complains
Kris Kutchera, vice-president for information technology at Alaska Air.
“The bigger they’ve gotten, the stronger they’ve gotten, and it’s
harder for customers to get a deal.”

 

That story summarizes why the market needs competition and why it is in the customers’ interest to encourage new suppliers. Ultimately that is the real market opportunity for companies like Zoho.

The BusinessWeek story does have some positive news:

 The giant Japanese telecom provider Nippon Telegraph & Telephone (NTT)
is going even further. It’s replacing many of its Oracle databases with
another open-source package, PostgreSQL. Takeshi Tachi, a senior
manager in NTT’s Open Source Software Center, says PostgreSQL is now
good enough to be used in some of the company’s most critical computing
systems. He expects NTT will save $10 million a year with the switch.
Ed Boyajian, CEO of EnterpriseDB, which sells PostgreSQL to NTT, says
he’s seen plenty of interest since Oracle said it was buying Sun and
MySQL. “A lot of attention has shifted to us,” he says.

The barrier today is in the minds of large
enterprises. They are not really locked in – if only they would look at
alternatives with an open mind, they can free themselves up from the
“deal with the devil”, as the CIO of Save Mart puts it. Companies that are willing to look around are reaping the benefit today.

The reality is that much of what enterprises consider to be mission-critical systems today can be done a lot cheaper, perhaps 80% cheaper than what today’s suppliers are charging. We run a world-class data center at Zoho, with entirely commodity components. Our reliability, performance and up time can easily compete with what the best of enterprise IT systems offer, at a cost that is just a fraction of what large enterprises spend. Ultimately, our pricing advantage comes from that architecture.

We have set ourselves the goal of changing the pricing
model in this industry. We firmly believe that today’s business models will
not be common by 2020, and our entire effort in Zoho revolves around
that fundamental thesis. As with all such revolutions, things start
small, and gain momentum. We are ready!