Price Slashing and Commoditization During Tough Economic Times

I read today that SAP might be reversing its decision in June to hike maintenance prices, or at least for customers in certain market segments and geographies. Whether the former or latter takes place, decisions such as these never cease to amaze me.

Price commoditization has been a game being played out in the IT market for years. Whereas vendors use to compete on price, thanks to the recent surge in acquisitions, companies such as Oracle and SAP feel they’ve reduced the number of suppliers, and thus the pressure to reduce prices.

Thankfully (or unfortunately) for customers, the global economy is in the tank, so economic conditions are undermining their ability to execute such policies…at least temporarily. That said, it shouldn’t take an economic meltdown to apply sufficient pressure to reduce prices.

Businesses that have already invested in software from the companies can’t afford to rip the systems out and replace them, with companies such as Oracle and SAP locking down customers and attempting to “milk em” for all their worth.

It’s good to see customers making a stand for themselves. In the next few years, I think choice and flexibility will continue to become a driving factor within the IT market, with scenarios such as these continuing to undermine the operational practices that have driven this market for years.