What Buyers Should Consider as Oracle Moves to the Cloud

Spend Matters welcomes this guest article by By Jeff Muscarella, partner, IT and telecommunications, at NPI, a spend management consultancy, focused on eliminating overspending on IT, telecom and shipping

Oracle’s business is undergoing a radical transformation as the company embraces a cloud-first revenue strategy. As Oracle pushes new cloud services to market, many customers are trying to navigate the vendor’s already complex and confusing licensing environment.

Customers have expressed discontent with Oracle’s licensing practices and its license management services (LMS) teams. In a survey of 100 customer organizations conducted by the Campaign for Clear Licensing (CCL), overall feedback concluded that customers receive inconsistent messaging and experience from Oracle teams.

The cloud has only added to this problem exposing several new risks throughout the purchasing and renewal process, including:

Oracle’s sales teams are under a cloud imperative – whether you’re ready or not. Oracle sales teams are under extraordinary pressure to drive adoption of cloud services with commissions rumored to be many times higher for sales of cloud subscriptions as compared to traditional license sales. Large discounts for on-premise solutions are not uncommon for customers willing to make cloud a part of their purchase or renewal. Oracle customers should carefully review their own cloud strategy and align it with the vendor’s. Savings opportunities exist for those that understand when and where to leverage Oracle’s focus.

Customers drawn to the simplicity of Oracle’s Managed Cloud Services need to think twice. Within the push to sell cloud services, there is added pressure to promote Oracle’s Managed Cloud Services. For a fixed monthly fee, organizations can leverage their existing Oracle investments and grow into the cloud with the help of end-to-end managed services. This outsourced approach may seem attractive to companies that aren’t ready to manage IT in the cloud, but it comes with risk. Under these services, customers pay for both licenses and professional services fees. They also concede much of the control of their Oracle environment, which makes it easier to become locked into the vendor’s offerings and gives Oracle better position to upsell and upgrade licenses and subscriptions.

ULAs have become a hotbed for overspending. There is a time and place for unlimited license agreements (ULAs) – but they are becoming increasingly risky for enterprise customers. Most customers under a ULA don’t have a clear view into what they own and what they deploy. This ultimately drives up support costs and promotes asset underutilization across the enterprise. When contemplating a ULA, customers need to have a clear view of what IT aims to accomplish under the agreement, and what they would pay if they took a more transactional approach.

In our opinion, Oracle can fail to help customers navigate changes to licensing programs and license choices. It is NPI’s opinion that Oracle’s sales teams often fail to advise customers on the full implications of their license/subscription choices, or simply aren’t up to speed on the contract terms they are selling. According to the CCL’s report, 92% of Oracle customers surveyed disagreed or strongly disagreed that communication from Oracle on licensing changes was clear and straightforward. Attempts to gain clarification through Oracle’s LMS teams often trigger compliance-driven review rather than answers. The moral of the story? It’s crucial for customers to seek independent experts in order to understand Oracle’s changing contract terms and license/subscription programs and make optimal choices.

Oracle is beefing up its audit force. Meanwhile, it’s never been easier for customers to be out of contractual compliance. We think Oracle licensing is intentionally complex, and there are often no license keys to manage or lock out procedures to act as customer cues that licenses are being over deployed or improperly used. The vendor provides little clarity within its contracts to understand what compliance looks like and, as mentioned earlier, inquiries into LMS often trigger reviews or sales engagements rather than advice. Oracle customers should be prepared to undergo a license audit in the next 12 months. Conducting an internal compliance assessment and addressing problem areas before Oracle requests an audit is absolutely critical in mitigating and/or minimizing penalties.

The Oracle purchasing environment is changing. As Oracle transforms its business, there are also savings opportunities for clients that can align their IT strategies with the vendor’s vision. Knowing when and where to apply this leverage will be instrumental in keeping Oracle costs in check.

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