New Headwinds for Oracle Present Negotiation Opportunities For Software Buyers

Spend Matters welcomes another guest post from Mark Bartrick of Forrester

For many years, Oracle has enjoyed fair-weather sailing, growing quickly to become one of the largest software companies in the world with annual revenues of some $37 billion. But the software market has changed in the last few years, and Oracle is starting to face some challenging new headwinds. Disappointing financial results, burgeoning third-party support offerings, the advent of SAP’s HANA DB, and a long-delayed Fusion strategy could be the perfect storm that takes the wind out of Oracle’s sails.

In new research, my colleagues and I maintain that savvy software buyers should take advantage of Oracle’s situation and negotiate better deals by adopting some of the following key practices:

Watch for blips in Oracle’s revenues that create buying opportunities. Like any vendor, Oracle’s revenues will hit the occasional bump in the road. The key is to spot when a sales blip occurs by monitoring Oracle’s press releases and financial statements. These blips are often followed by special promotions, deals, or discounts, which are made temporarily available to get sales numbers back on track.

Use Fusion adoption to gain concessions. Oracle is keen to see clients adopt the new Fusion Applications, but we think that Oracle is finding it difficult to get customers (who are happy with the current products) to upgrade. A savvy buyer should challenge Oracle to produce a significantly compelling business case to upgrade. For example, you could offer your firm as a case study in return for much better pricing or some free professional services.

Introduce competition to drive down maintenance/support costs. In any market, choice and competition ensure that all parties must work harder to obtain and keep customers. With third-party support companies now offering a serious alternative to Oracle’s own support and maintenance contracts, savvy buyers should press Oracle to either address its pricing or improve the value of services it offers.

Review your sourcing strategy for database and middleware software. The days of Oracle gaining easy database business on the back of SAP application sales may be numbered. HANA DB gives SAP and SAP customers a new option, and buyers ought to leverage this opportunity to get SAP and Oracle to compete to be their database provider.

As Forrester has found, when organizations adjust their negotiation strategy to reflect a vendor’s current financial position, they can often drive better deals and save money. The state of Oracle’s current market position means that Oracle is trying to work though some choppy waters as it evaluates current challenges, risks, and opportunities to find solutions. In the meantime, however, smart buyers should see what negotiation opportunities exist.

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Comments

  • John Appleby:

    This is very smart advice, no matter which Enterprise Software vendor you are looking to do business with.

    One think to bear in mind is that it is possible to renegotiate the terms of your contract on-premise or in the cloud, in the context of shelf-ware, license buy-backs or such agreements. This can be very advantageous if you have the upper hand.

    I would also add that if you want a partnership relationship rather than a vendor relationship with Oracle or SAP, then you need to behave that way towards them. Using these above points to create an overly adversarial relationship will count against you in the long time.

  • Naren Chawla:

    Agree with John. For strategic vendors, treat them as your partner and they will go the extra mile to make you successful. .

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