SAP, Oracle Abusing Customer Relationships

Last Updated Apr 15, 2009 1:27 PM EDT

Software vendors are blackmailing customers, misleading them about future product releases, and selling them consulting services that are nothing more than sophisticated product pitches, blogs Ray Wang, a leading enterprise software analyst with Forrester Research.

Wang protects the identities of the companies in question, but his readers have chimed right in to identify SAP and Oracle as among the leading culprits. One wrote, "I need third party maintenance options to keep SAP and Oracle at bay."

Indeed, most customers have a love-hate relationship with their vendors that is heavily weighted towards hate. One reason many customers give for switching from traditional enterprise software products to software-as-a-service (SaaS) is that they believe it gives them a way around so-called vendor lock-in, which occurs when customers have so much money and resources tied up with one vendor that they have no choice but to keep doing business with them.

If consumers have limited protection from unscrupulous merchants, enterprises seem even more vulnerable to tactics that border on the criminal. For instance, the CIO of a North American manufacturing company said he ended up buying a product that the vendor plans to discontinue because of M&A activity. This is akin to buying a Buick and then discovering that GM won't be making parts for it after next year. Even worse, what if you asked that possibility but were convinced to buy the Buick anyway because of GM's explicit promise to continue supporting that model no matter what, and then discovered that was a lie? That's exactly what happened to this guy:
We were told that we needed to upgrade to the latest version of our [product]. Post acquisition we were left confused as to the final product road map. Our contract renewal came before the final decisions were made. We asked for a 60 day extension. The sales rep told us we would be out of compliance should we wait. Against our better judgment we went forward with the purchase of additional licenses only to find out the product would be discontinued. We asked for credit towards the new product and were told none would be given.
Another IT manager sounded like he was in a dysfunctional relationship -- or worse, being extorted by the mob. The vendor in question had the temerity to tell its customer to buy unnecessary products simply in order to meet some arbitrary number, or else suffer punitive price increases:
Our sales rep told us we needed to spend a total of 5M euros for maintenance in order to keep the lower tiered rate of maintenance. We were short by 500,000. He then gave us a list of items we had not purchased to date. Nothing on that list was beneficial to us. We did not need BI. We did not need compliance. He said this was of no consequence. We needed to come up with the difference and he would not make any exceptions. We also wanted to reduce the number of instances of ERP. He even got angry at us!
"He even got angry at us!" You wonder if he proceeded to beat the customer and then claim it was all his fault for provoking him.

Wang noted that vendors need to stop selling products just for the sake of meeting "total account values," which would seem like pretty obvious advice. But vendors have operated as if their large clients were personal fiefdoms. I've had vendors at conferences boast to me that, "I can just walk into [Company X] and get anything I want."

If there's a silver lining, it's that all the customers quoted by Wang have decided to stop spending money with their vendors, either temporarily or permanently. The cloud of that sliver of silver, however, is that there aren't very many good choices, especially as consolidation in the software space has further reduced the number of options available to customers. It's no wonder many of them are so intrigued by SaaS, even if it's not as customer-friendly as advertised.
  • Michael Hickins

    Michael Hickins has written about technology and business for BNET, InformationWeek, InternetNews.com, eWEEK -- where he was executive editor from 2007-2008 -- The Curator, Pseudo.com, Multex Investor, Reuters, and Conde Nast's WWD.com. Hickins is the author of The Actual Adventures of Michael Missing, a collection of short stories published by Alfred A. Knopf in 1991. He also published Blomqvist, a picaresque novel set in 11th century Europe, in 2006. Hickins remains passionately interested in the intersections of business, technology, politics and culture, and endures a life-long obsession with baseball. He is married with two children and lives in Manhattan.

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