Oracle's New Sun Support Policy May Disrupt the Hardware Maintenance Market
30 March 2010

Rob Addy, Ron Silliman, Adam W. Couture

Gartner RAS Core Research Note G00175502

Oracle announces its new Sun support policy that has the potential to radically change the way in which OEMs offer support and may make third-party maintenance offerings for Sun hardware unprofitable.


After months of uncertainty, Oracle announced its Sun support policy without fanfare or publicity. These changes are significant and affect every Sun customer. Oracle is offering high-end support at up to 50% below the current market rate to attract users who defected to third-party maintainers (TPMs). This bold and aggressive policy has the potential to shape the market, because it will exert considerable pressure on TPMs that actively canvassed the Sun installed base after the acquisition was announced. Simplified support pricing in effect reduces choice and may polarize customer opinion despite the value of their offering.

Key Findings
  • Sun's tiered model has been replaced with; Oracle Premier Support for Systems and Oracle Premier Support for Operating Systems.
  • Premier Support for Operating Systems is 8% of the hardware purchase price and covers Solaris, Oracle Enterprise Linux, and Oracle VM on Sun hardware.
  • Premier Support for Systems is 12% of the hardware purchase price and covers the selected Oracle operating system, hardware support, replacement parts and a two-hour on-site service-level agreement (SLA) within 25 miles of an Oracle service center.
  • Sun hardware includes a standard one-year parts warranty that is unrelated to these offerings. There is no extended warranty, because Oracle expects customers to take advantage of Premier Support for Systems.

Sun users should:

  • Review their hardware portfolios and consider Oracle support for their systems.
  • Ensure current arrangements include vendor-backed support for their chosen operating system.

OEMs should:

  • Expand support for multivendor engagements, an area in which Oracle does not yet appear eager to compete.
  • Consider responding to Oracle's challenge, because traditional support pricing may make its hardware less attractive to buyers focused on total cost of ownership.

TPMs should:

  • Develop services that focus on incident prevention and derived value.
  • Expand multivendor offerings, as well as time-and-materials and next-business-day services, where they can compete profitably at a lower price than Oracle.

What You Need to Know

Oracle has managed to walk the tightrope of customer concern and has balanced the fears of existing customers with its need and desire to monetize its Solaris software assets. The legacy bundling of Solaris support within Sun hardware maintenance offerings provided a very real challenge. Oracle has created an integrated support offering that should not only cement and reinforce its relationship with its newly acquired Sun customer base but also has the potential to change the way in which hardware support services are perceived by the market in general. Given that Oracle could have done much less and taken the easy way out by incurring short-term customer dissatisfaction, this move is considered a positive affirmation of Oracle's commitment to its newly acquired hardware business and its legacy customers. It remains to be seen if this disruptive move will force a step change within the hardware support market, but it certainly appears to offer good value to established Sun users and is likely to make Oracle hardware increasingly attractive to new purchasers. The much-anticipated massive price increase for Sun support (in particularly Solaris) that many feared has not happened. Instead, Oracle has come to market with aggressive support offerings that hark back to the Sun model of integrated support, while giving customers the option of sourcing hardware support separately from another provider if they wish.


Event Facts

Oracle published its new Sun maintenance and support policy on on 18 March 2010. Details of this policy may be found at The key facts relating to this announcement are as follows:

  • There are now only two Sun hardware-related support offerings; Oracle Premier Support for Systems and Oracle Premier Support for Operating Systems.
  • Premier Support for Operating Systems costs 8% of the net hardware transaction price and gives 24/7 coverage for Solaris, Oracle Enterprise Linux, and Oracle VM on Sun hardware with a one-hour remote response time SLA. Customers taking this offering are able to switch between Oracle operating systems as they wish without incurring an additional licensing cost.
  • Premier Support for Systems costs 12% of the net hardware transaction price and includes all the benefits of the Premier Support for Operating Systems offering, as well as delivering 24/7 hardware (server and storage) support, inclusive replacement parts and a two-hour on-site response time SLA within a 25-mile radius of an Oracle service center for Severity 1 issues.
  • The fact that there is a mere 4% uplift from the operating system support offering to the full integrated service shows Oracle's clear intention to win back the many Sun customers who have defected to alternative support providers over the years.
  • Customers with sites between 25 and 50 miles from an Oracle service center may elect to accept a four-hour response SLA or can pay an additional fee to upgrade to two-hour response.
  • Additional value-added support services related to Sun hardware and software are available as optional extras.
  • Sun hardware comes with a one-year parts warranty that is unrelated to these offerings. There is no extended warranty as Oracle expects customers to take advantage of Premier Support for Systems, which includes replacement parts, as well as break/fix remediation. Customers who require a replacement part under warranty but do not have an Oracle support contract in place can expect a turnaround time of up to two days for a field replaceable unit that requires an Oracle engineer to come on-site.
  • The absence of a stand-alone extended warranty option for replacement parts may be seen by some as restrictive. Typically, extended warranty costs are significantly higher than the 4% uplift associated with Oracle's system support offering, so the perceived lack of choice may be countered by the preferential pricing of the integrated offering.


Oracle Rejects Traditional Hardware Support Pricing Models

Hardware support and maintenance pricing is not an exact science. Traditionally, many factors come into play and it is common for vendors to offer different price points within different geographical areas, and indeed within the same locale. The primary factors that determine the price (as a proportion of the original equipment purchase price) of a hardware maintenance contract are as follows:

  • The level of responsiveness required, that is, the SLA
  • The type of equipment to be covered, that is, the level of moving parts that will wear versus solid-state designs
  • The volume of the equipment in circulation, that is, a measure of the availability and costs of spare parts, as well as any specialist skills needed to service the equipment
  • The age and use profile of the equipment, that is, is it running at near capacity or is it idle?
  • The physical location of the equipment (with relation to its proximity to major metropolitan centers)
  • Warranty terms offered by the original equipment manufacturer, that is, is the equipment under warranty?
  • The level of component replacement exclusions incorporated into the contract, that is, if a customer waives the inclusion of power supply units within the scope of the contract terms
  • Value-added services included within the scope of works, for example, remote monitoring services
  • The nature of support to be provided, that is, limited to reactive break/fix versus a more-proactive approach that aims to avoid service-impacting events
  • Availability targets associated with the equipment covered by the service
  • The level of any punitive penalties associated with SLAs within the contract

Of the weighting factors outlined above, the SLA level, the equipment scarcity or proliferation and the level of penalties within the contract tend to have the greatest impact on final pricing. Oracle's new hardware support pricing negates much of the above by offering a single consistent pricing structure for all Sun hardware, including storage and servers, across the world. Oracle has a well-deserved reputation for playing commercial "hardball" with respect to support discounting. It does not typically discount its software support services, and Gartner believes that it will continue this policy within the hardware support arena.

Oracle Diffuses Potential PR Disaster

In many respects, Oracle was in a difficult position with regard to what to do with its hardware support and maintenance portfolio. Some will undoubtedly see this move as a way for Oracle to lock in customers into vendor-provided support by creating a barrier (in the form of the 8% charge for Solaris support) to customers going to an alternative provider for hardware support services. While this is true to some degree, the pricing model that Oracle is offering for integrated hardware and operating system support is significantly lower than the current market rate for comparable services, and, as such, it would be difficult to accuse Oracle of acting against the interest of its customers. Oracle's growth strategy has been built around securing a solid base of recurring annuity-based revenue. If the services delivered by Oracle continue to meet the needs of its customers at a price that represents good value, then it is somewhat churlish to resent Oracle's desire for a predictable revenue stream that enables it to plan and invest.

Sun users should review the coverage of Oracle service centers against their site locations to determine whether they fall within the 25- or 50-mile radius. Given the typical use scenarios of Sun hardware within the enterprise application stack, single points of dependency may be rare, and consequently it may not be necessary to pay an uplift for improved response times where there is sufficient capacity within a cluster to accommodate losing a single node for a slightly extended period.

Oracle is one of the few vendors actively investing in proactive and predictive support services, as defined within Gartner's Product Support Maturity Scale, and it will be interesting to see how these investments manifest themselves within their hardware support portfolio. Initial briefings indicate that the Sun maintenance offerings will leverage Oracle's My Oracle Support platform and will continue to build upon the work Oracle has done in this area. Sun customers should invest time to fully understand all that is available within the My Oracle Support portfolio, as many organizations fail to take full advantage of the features and services available under their contract with Oracle.

This Move Could Significantly Impact OEMs and TPMs

As the newest OEM, Oracle has made its intentions clear. It has rejected the conventional wisdom of the support marketplace and is engaging its competitors head-on. By making the reduction of the ongoing costs of support part of its go-to-market strategy it is clearly differentiating itself from the competition. How can IBM, HP, Dell, Cisco and EMC justify their current support pricing policies in an increasingly commoditized market in which equipment capabilities are comparable and technology-based advantage is short-lived? If Oracle simply matches hardware purchase prices with its competition, it may find that it is still more expensive than vendors that offer a three-year, four-hour warranty as part of the equipment purchase. It should also be remembered that 8% for operating system support is of the total net hardware transaction. Other vendors will charge 15% to 20% for software support, but this is a percentage of the software support element of the purchase price only. It is, therefore, essential for buyers to incorporate full life cycle costs into their purchasing decisions.

The effects of these changes to the third party maintenance market for Sun hardware are yet to be seen. Dell sparked a price war in the client system support marketplace during the 2001 recession that had a substantial impact on the service strategies of many participants in the market. During the recession, now moving toward a conclusion, OEMs, in particular, have been cautious not to do likewise to the market for supporting hardware support products in the data center. It remains to be seen if Oracle Sun still has the market presence to commoditize support pricing for servers. However, Gartner predicts that many Sun users will return to the Oracle fold due to the combined incentives of authorized software support for Solaris and the relative low pricing of the system's service.

When questioned, Oracle executives stated that they had no intention to actively pursue third-party maintenance contracts themselves at this time. However they did leave the door open to this possibility in the future. It is a fact that the StorageTek business that Sun acquired previously had a strong reputation for multivendor support, which may be a capability that Oracle could leverage if it were to begin competing head-to-head with other support providers for consolidated maintenance deals. Third-party maintainers are unlikely to be able to match Oracle's pricing level and include authorized support for the operating system within their offerings. This will mean that either they must develop and deliver value-added services that differentiate them from Oracle, or they must head for the other end of the market and offer bargain basement services, such as 9/5 support services with a next-day response time SLA at a very low price. It is not yet clear what Oracle's policy for replacement part pricing to external parties will be, but it is likely that it will promote the use of the official Oracle support model. This may or be problematic to third-party maintainers, because some already use insurance-based models for parts purchasing, simply bundling the premiums for this underwriting service into their cost models. In localities where Oracle does not have a direct presence, third-party maintainers are advised to seek approval from Oracle to become authorized support providers, because these positions are likely to be highly prized within the local market.

Examine the Contract Details Closely

Sun users should carefully review the terms contained within Oracle's Hardware and Systems Support Policies (see to ensure that they are not caught out by some of the contractual subtleties. Areas of particular note include:

  • The fees associated with the reinstatement of Oracle support if technical support lapses for more than 90 days are somewhat punitive. It is unclear whether Oracle will be prepared to waive these fees as part of any promotional activities to encourage customers currently with third-party maintainers to return to direct support. This will particularly be an issue for organizations currently locked into extended contracts with third parties that don't have the option to switch back to direct support at this time. Gartner recommends that organizations in such circumstances engage with Oracle sooner, rather than later, to understand their future options and costs.
  • Hardware cannot be removed from the support roster until annual contract renewal dates. This inflexibility may mean that hardware refresh or repurposing cycles will need to be aligned with Oracle contract renewal dates to prevent incurring unnecessary costs.
  • The defined System Lifecycle Policy states that hardware and firmware will be supported for only five years from the last shipment date. There is no indication of what provision there is for equipment older than this, but given the reliability and stability of legacy Sun hardware, it is recommended that customers seek assurances from Oracle with respect to the fees to be levied for equipment running beyond this operational window.

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