Moran Technology Consulting

Ellucian – You could have been my hero… Sigh….

Ellucian: Being a software vendor is tough….. In good times, you make big piles of money when you sell new licenses. You also make good recurring revenue from annual maintenance fees. These annual maintenance fees are supposed to pay for software break/fix support and, most importantly to your customers, new product development. And most importantly to your Private Equity (PE) owners: profit. Without profit, your firm dies, which is not good for anyone, particularly, your many customers. Profit concerns are probably what drove your original PE to recently sell you to another PE firm.

Ellucian owns a few ERP suites and the best and most robust is their Banner product line and it appears to be the recipient of most of Ellucian’s new product development. However, over the past several years, new Banner licenses have been hard to find for Ellucian. We’ve heard estimates that Banner provides about 50% of Ellucian’s annual revenue mostly through annual maintenance fees. These fees are literally the ‘cash cow’ for any software firm.

While previous owners of Banner (SCT, SunGard HE) were never shy about raising maintenance rates, Ellucian has raised this to a new level. Without the huge profit hit from recent new license sales, Ellucian’s PE owners have turned to ratcheting up their annual maintenance fees up by 3-5x inflation to get profit up. The current maintenance renewal pricing appears to be 5% per year for a five year contract, with variations for shorter / longer contracts. At 5% per year, customers will be paying over 27% more in five years than they are today.

At the same time, Ellucian’s customers are financially struggling with slowly eroding student populations, increased discounting to get students to show up and, for public sector campuses, continually falling state financial support. As such, these huge annual price increases are killers for Banner customers. The level of customer venom and anger aimed at Ellucian is accelerating.

And yet if Ellucian asked its customers who they hate more than Ellucian, Oracle would jump right out. Oracle’s pricing for its database products is crazy. At many schools, they are forced to pay almost as much for Oracle as they do for Banner. Let’s think about this: A database tool that provides as much value as a complete ERP system?

Is there any obvious alternative? Absolutely: Microsoft SQL/Server. It is as good a database management system as Oracle database and, with generous higher education discounts from Microsoft, about 10-20% of the price. Oh yeah, Banner only runs on Oracle….

Do any Ellucian competitors support MS SQL/Server? Yep, in fact, as far as I can tell, Banner is the ONLY higher education ERP product that only runs on Oracle DB. In fact, Ellucian’s other two ERP suites run on SQL/Server, so we know that Ellucian has SQL/Server DBA’s and programmers. Don’t forget the big ERP dirty non-secret: Oracle’s PeopleSoft ERP runs fine on MS SQL/Server, not just Oracle DB. Ellucian is the lone ERP vendor requiring Oracle database.

And this is where Ellucian really blew it…. They are doing a massive software development project to create a new product line called Banner XE. I really like what they are trying to build – They seem to be focused on the right stuff and doing it the right way (in general…). At the moment, Ellucian’s primarily focusing on peripheral products to get new license fees but the core products are getting rebuilt too.

When XE was first announced there were rumors that Ellucian was considering supporting both Oracle DB and MS SQL/Server. However that talk quickly disappeared. Ellucian is building Banner XE products solely on Oracle DB.

Over the past few decades, I’ve seen MS SQL/Server grow and mature and, for higher education institutions, there is very little that Oracle provides that MS SQL doesn’t match. I watched a recent performance shootout between PeopleSoft running on Oracle and SQL/Server and, statistically, there was virtually no difference in their performance numbers. None….

Ellucian: I have no way to know why you didn’t add SQL/Server to your supported DB list for Banner XE. My guess is that your internal guys ‘only know Oracle’ and they came up with lots of reasons that Oracle was better so that they could protect the value of their skills. I doubt that you did any analysis with a bunch of your customers about this… I don’t know any schools that want to keep paying all that money for Oracle DB – and I’ve talked and worked with hundreds of schools over the years.

Ellucian, you could have been my hero. More importantly, you could have been your customers’ hero. If you had added SQL/Server support to Banner XE, you could have cut almost 50% of the cost of running Banner by eliminating the need for Oracle DB. And you could have done this without losing any revenue. You seem to have some loyalty to Oracle – a firm that continues to try to put you out of business at every turn.

You may not have noticed, but the Higher Education ERP marketplace is exploding with new products and new vendors that are arriving between now and the next 3 years.

The math is simple: Mad customers + no options = lost customer base.

Ellucian, you blew it….

Redemption is possible: it’s never too late to announce new database support. Show customers that you understand their pain and show them a path to drastically cut their bill for supporting Banner….. They won’t like your big maintenance increases, but, for a while, they will love the drop in the cost of running Banner.

People like to stay with their heroes… Become our Hero….