Oracle Takes the Red Pill

Oracle has apparently decided to stop pretending that licensed software sales is the future. Word on the wire (and I’ve heard this independently from an industry contact as well) is that the company has been mulling to go all subscription sales over the next two years.

Oracle (ORCL) plans to phase out license sales in the next 18-36 months, First Albany says in a note citing “industry contacts.” License sales, which reflects new business, has always been a key figure for software companies, but ORCL has recently been encouraging analysts to take a closer look at the more stable maintenance streams.

[Update] Oracle’s already trying to downplay this notion, with analyst Rick Sherlund at Goldman Sachs out with a note saying management says it’s not imminent. Maybe, but I still think Larry looks covetously at the life subscription model.

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  3. Lane: Oracle Should Stop Selling Apps
  4. Ellison’s Audible at Oracle
  5. NatPost Column: Oracle Antitrust Decision

Comments

  1. also risky as hell. I help CIOs negotiate deals and s/w maintenance contracts are the single biggest Red Flag to them. 22% a year at 95% margins to Oracle, SAP and others are an inviting target.
    The economics of software need changing not just guiding wall street to re focus

  2. Venkatesh says:

    The problem is they are not ready for subscription model. They are still a very thick client company with major apps in thick client wilderness.

  3. That’s the part that puzzles me. Merely going to subscription models is a tricky change to make stick when your core software is still thick as a brick.

  4. Venkatesh says:

    SAP’s releasing SOA in March and Oracle had to do something prevent being left out. The problem is having a strong database has been both boon/bane. It prevents them from fully understanding the dynamics of subscription model because they have big stake holders in license sales. It can have a cannibalizing effect on DB sales. The field has changed today and they don’t have a choice.

  5. innov8ordie says:

    So Oracle is one of the first big SW companies seriously contemplating moving away from paying for lisences. Simply pay for support in a nice steady stream and no one needs to get hurt. I happen to agree that this is where the enterprise software market is going but I believe there will be short term pain for all public SW companies that try and make a switch.
    http://paul.kedrosky.com/archives/002800.html
    First Wall Street will definitely not like turning off any revenue stream and it will breed insecurity about the companies prospects. Never good. Second, any change in how a company charges for its services (particularly big companies) lets its clients step back and consider if all those checks they have been writing make sense. This is particularly true of major infrastructure purchases like Oracle. So many will decide open source options like MySQL still are not up to snuff, but how many will reconsider?
    It really feels inevitable long term to shift to a quasi-services model, particularly as the open source options get better and better. As inevitable as it may be it will not be easy.