Will Oracle’s Continuous Innovation Release Model Spur Migration to Other SaaS Platforms?
Oracle’s Continuous Innovation release model is a reinvention of Oracle’s support services intended to encourage companies to pay a maintenance stream for updates to existing installed on-premise software, along with the associated costs of hosting, administering, and applying those updates.
But, if customers reject this model and decide to move to a software-as-a-service (SaaS) model instead, does this represent an exit ramp away from Oracle? For reasons we will explain below, once you decide to migrate to SaaS, it makes sense to look at all your options, not just Oracle SaaS products. And when that happens, customers may move away from Oracle.
The more that move away, the bigger the risk to Oracle. Let’s take a look at the forces driving this trend.
When Will the Continuous Innovation Model Lead to a SaaS migration?
Oracle’s interest in promoting its Continuous Innovation support strategy is based on the benefit it gets from preserving the maintenance stream. See this story for details (“Dissecting the Oracle Continuous Innovation Model: Great Deal for You or Oracle?”).
But as we have pointed out in previous articles, it is not obvious that the Continuous Innovation model benefits customers.
As noted in this article (“Are Oracle’s Continuous Updates Worth It?”), if Oracle customers can’t keep up with the pace of updates, they get little benefit from the continuous flow of updates.
In addition, as we explained in this article (“The True Costs and Burdens of Oracle’s Continuous Innovation Model”), paying ongoing annual support fees just to get access to updates is one cost, and applying them and training staff to use them adds more expense that is only returned if the updates really help your business.
In addition, one of the requirements of signing up for the Continuous Innovation support model is that you must stay close to the current version, and this includes not just the applications but the corresponding toolsets and Oracle technology. If you fall several versions behind, meeting these requirements becomes a project that may entail quite a bit of work and cost to get current.
The Risk of Considering a SaaS Migration
Once a customer starts to get concerned about the expense and value of staying with an on-premise solution, a natural next step is to consider a SaaS solution. But this represents a risk for Oracle for the following reasons:
- Once you start thinking about moving from an on-premise solution to SaaS, it becomes obvious that they are completely different products. Moving to a SaaS application, even one from the same vendor, is like adopting a new piece of software; it is not just an upgrade.
- After this idea sets in, the advantage of staying with Oracle drops. If a migration is necessary, why not migrate to the best possible product?
- At this point, all SaaS competitors come into play. Once Oracle customers start considering SaaS, the next logical question is whether Oracle SaaS is the best option in the market compared to industry leaders like Workday, Cornerstone, and Salesforce.
By promoting the Continuous Innovation model, Oracle is wagering that customers will elect to stay with their on-premise solutions and ostensibly get better versions of those applications, as well as support for at least the next ten years, instead of migrating to SaaS. Oracle is making this gamble despite the fact that with SaaS, companies no longer have to pay for hardware or for staff to maintain the applications.
There is a logic here — companies fear the disruption that a major upgrade or migration to SaaS can cause. The known is always more comfortable than the unknown — even if the known in this case comes with high operating, resource, and staff costs to apply frequent updates. Oracle wants to encourage companies to stick with what they know and make their Continuous Innovation model as attractive as possible because then companies stay on their maintenance plan — which is a tremendously profitable source of revenue for Oracle.
It’s hard to know how many companies have done SaaS migrations to Oracle or other products after considering the Continuous Innovation model, but we will keep looking for evidence.
Third-Party Support & Hybrid IT: Another Alternative to the Continuous Innovation Model
In the cases where businesses are not ready to remove their on-premise Oracle footprint entirely, companies are considering the benefits of third-party support in lieu of the Continuous Innovation model.
Third-party support can offer a wider and more comprehensive range of services than Oracle’s Continuous Innovation model, including support for at least 15 years for the remaining on-premise ERP applications — all while offering 50% (or greater) discounts in the total cost of maintenance and support as compared to the vendor.
Additionally, certain third-party providers can also support the integration of on-premise Oracle applications with Workday or Salesforce SaaS, allowing companies to have a single point of support across their entire environment.
Finally, for many customers, moving to the cloud-based IaaS can be a better option than going to SaaS, as they can first offload ongoing data center operations, but still retain their Oracle software licenses and customizations. In addition, IaaS offers a lower risk of vendor lock-in, but still allows for a move to SaaS at a later time. Conversely, once a company replaces its ERP with SaaS, it will be hard if not impossible to go back and try out IaaS.
This is why Hybrid IT is so attractive for many Oracle ERP customers as they can adopt the cloud in stages vs. all at once to minimize risk and maximize short-term value while still future-proofing the business with an option to move to SaaS.