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Beware the ERP License Police

 

May 22, 2012

Doug Hadden, VP Products

ERP License Police?

There’s more disturbing news from ERP vendors: charging customers for “indirect usage”. Dale Blake, the CEO of UpperEdge suggests that one particular ERP vendor is taking advantage of customers by “predatorily squeezing fees from their customers, and worse, seizing the opportunity to reduce flexibility and promote an anticompetitive environment.” This particular ERP vendor is charging customers for interfacing or using data in 3rd party systems. A spokesman from the ERP vendor suggests that Mr. Blake is misinformed. Of course, this comes from the vendor who tried to unilaterally increase maintenance fees in 2010. And, the other large ERP vendor has been fighting to eliminate 3rd party maintenance providers while accused of over-charging the United States federal government for software licenses.

Is this a trend? Will we see large enterprise software vendors leveraging market share to extract more revenue from customers – yet deliver less value? It’s ethically disturbing.

Not to mention the strong words like “screwing”, “fraud” and “restriction of trade” used in the articles that I’ve linked to.

My sense is that the ERP business model has become obsolete. ERP vendors can no longer exploit a lack of information in the market. Customers know that middleware is a commodity, that cloud services can be far more efficient, that proprietary technology is overly expensive and that many customers are negotiating for lower maintenance fees.

Hidden costs are no longer hidden. And, the power ratio is shifting from vendor to customers. (Something that we’ve embraced to generate customer innovation).

Yet, large ERP vendors believe that they own customers. They’ve bought other companies in order to restrict customer choices. They provide a proprietary stack of middleware to increase switching costs. Yet, customers continue to switch to more agile solutions. ERP vendors continue to acquire cloud players, but as analyst Larry Dignan suggests, ” without maintenance and software lock-in, keeping customers may be a bit trickier.”

 

 

 

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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