Oracle Renewal on the Horizon? What You Should Know

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

Oracle's hardware and software solution stack can be found in 100 percent of the Fortune 100, making it one of the most pervasive vendors in the enterprise IT ecosystem. Part of that success is due to Oracle's ability to monetize complex contract structures and lock customers into high maintenance/support fees. This begs the question: will you be one of those companies in 2012?

If you're investing in a new Oracle solution, or upgrading or renewing an existing one, here are four things you need to know:

  • Think twice about ELAs. Many companies are drawn to Oracle ELAs (enterprise license agreement). At first glance, they appear to simplify the contracting and vendor management process by packaging a variety of software, support, services and training into a single agreement. Oracle counts on customers to plan aggressive rollouts of their offerings while they are buying; but the reality is that the scope and timing of implementations rarely meet initial expectations. You may only use 50 percent of the applications and tools specified in your agreement -- but, you'll pay support on all of them. Before you sign an ELA, determine if you will use enough of the tools and applications to justify support costs.
  • Explore third-party support options. With maintenance rates at an all-time high (22 percent), more companies are turning to third-party support alternatives for their Oracle investments. Options range from hybrid support providers who work directly with Oracle to deliver their services, to providers that work independent of Oracle's partner program. Both options have risks and rewards that should be carefully weighed.
  • Structure your new Oracle agreement for savings now...and later. Fair market pricing, discounts and terms in your initial purchase agreement are critical to preventing overspending. If you're making a new Oracle purchase, explore how you can strategically separate your Oracle buys and ensure fair market value pricing for each purchase.
  • Aggressively negotiate discounts. The range of discounts that Oracle will grant is vast -- anywhere from 10-90 percent. To achieve the high end of this range, buyers must take into account many factors including:
    • Timing of the purchase relative to Oracle's financial calendar
    • How motivated Oracle is to increase market share for a specific solution
    • How much Oracle is currently emphasizing the displacement of a particular incumbent competitor in accounts -- they have very specific market share and account footprint objectives that they pursue aggressively

-- Jon Winsett, CEO, NPI

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