SAP's purchase of TomorrowNow in 2005 sounded like a great idea: Undercut Oracle on support and squeeze your biggest rival. And then came Oracle's lawsuit.
SAP said Monday that it will wind down the operations of TomorrowNow, which provided third party support for Oracle applications. In a statement, SAP said that it is working with TomorrowNow's 225 current customers to return to Oracle's support or other options.
The enterprise applications vendor said in a terse statement that it will conclude winding down TomorrowNow by Oct. 31.
Why did this happen? Here are a few thoughts:
- The Oracle lawsuit against SAP and TomorrowNow was a huge distraction and SAP really didn't need the bad press. TomorrowNow is a sacrifice ahead of a settlement with Oracle—there's a settlement hearing scheduled for Oct. 6.
- Customer pricing and pricing power. One of the hot topics on the Enterprise Irregular mailing list in the last week was the price increases on support from SAP and Oracle. The big question raised by the price increases: Why do customers play along? The answer to me is rather simple: Customers don't have a choice. You can't rip out ERP software like it's a word processor. It hurts. Your choices are to swallow a price increase on support or risk your business to save some dough. Both SAP and Oracle have pricing power and in this new world order you really don't need something like TomorrowNow screwing it up. Vinnie Mirchandani sums it up:
What does it change? Not a whole bunch. Along with printer ink at $ 5,000+ a gallon, mobile overseas roaming at $ 3 a minute, outsourced storage at $ 3 a gb a month, software maintenance with its 95% gross margins is one of the most "empty calories" in tech spend.
- Times have changed. When SAP bought TomorrowNow it was really about attacking Oracle. Business strategy? Not necessary if you could stick it to Oracle chief Larry Ellison. But a funny thing happened during this dogfight: There's a comfy duopoly going on. There's a reason Oracle and SAP have pricing power: Those two are the only ERP game in town. Sure they compete on verticals and in individual deals, but overall life isn't so bad for these two. It's not a zero sum game by any stretch and splitting the market in halves makes sense.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of TechRepublic.