ORACLE, THE MOST EXPENSIVE SOFTWARE ON THE PLANET?
How to Get the Best Deal
Oracle Business Intelligence Suite Foundation costs $300,000 per processor. So for a small 4 processor, 4 core server you would be charged a huge $2.4 million to license it, making it one of the world’s most expensive software products!
Introduction
Founded on its core capability, Oracle has for nearly 40 years provided database software to the top 200 of the Fortune 500 list. Oracle has acquired over 37 software companies since 2011, with its larger additions of Siebel, PeopleSoft, Sun and BEA, enriching its portfolio to cover nearly all business processes. From ERP to Hardware and the Cloud, Oracle has diversified its platform to become one of the titans of the business software industry. Revenues in 2016 were $37 Billion, 80% of which were software related.
Lime Squared's work with over 100 large enterprises has proven that looking into these key areas are vital for a successful approach when balancing costs, making savings and avoiding risk when licensing Oracle’s products:
• Technical Design and Architecture
• Commercial Strategy
• Compliance
• Support Cost Reductions
• Cloud Approaches
Technical Design and Architecture
We often hear from our customers that the design process has not been coordinated with licensing specialists to ensure that solutions delivered are fit for purpose in terms of cost factors.
At initial design or redesigning of systems, we have seen multi-million dollar risk exposures due to a lack of understanding of Oracle’s license requirements. VMware is a prime example of this issue. Many companies are committed to a scalable and more cost-effective model using VMware, but licensing costs easily outstrip the benefits when you have to license everything. Oracle continue to state that you need to license anywhere and everywhere that runs Oracle.
The complexity in Oracle licensing has been well documented, however the simple fact is you pay for what you use. If you’re not using it you’re wasting money. The reality we see is a system is often 60-70% over designed in terms of capacity. Resilient, yes, but over specified.
In recent years Capacity and Demand Analyst roles in IT have been declining as cheap hardware has made it easier for IT to spend less but receive more of it. Licensing costs have increased, More Hardware = More CPU = More Licenses. Without a CPU expert, you will be spending more than you need. It sounds obvious but our perspective is; a good design aligns with good licensing models and a good understanding of what capacity the system will need to run at. We help our customers understand what the implications of a particular license metric and hardware platform will make in delivery of a cost-effective overall solution.
Commercial Strategy
We all know that Oracle products can amount to be a great expense, but most procurement and commercial managers are aware that deals can be negotiated. In a recent survey to our customers, we have found that 62% responded with the consensus that Oracle is willing to negotiate unlike Microsoft or IBM.
We’ve summarized these points to help you get a good deal with Oracle:
Timing
• Oracle’s sales strategy of giving larger discounts at quarter/year end significantly impacts price and deal offers.
• If Oracle knows in advance that you are going to purchase, they can get better internal approvals.
Future Requirements
• If you know that you will need additional licenses in 6 months, it may be better to include them in the scale of the deal, and future proof your discounts.
Scale of the deal
• Size is everything in this case, whether you are dealing with a global account rep or transactional internal rep, they all have their limits on what size of deal they can book and the amount of discount you can negotiate.
Complexity of the purchase
• The complexity and number of products required can influence the end result.
• Using simple license metrics can be more beneficial. Per User/Per Employee (Named User Plus) can be used if the end users can be counted. And will be less cost than Processor based licensing.
Commercially, Oracle can be challenging, but with clear requirements and by understanding your Account Teams motives, you can deliver impressive discounts, and agreements, which benefit your organization.
Compliance
It may be a platitude, but in the case of software licensing, the last thing you should be thinking is “What I don’t know can't harm me”. We have seen an increase in senior staff being moved internally or even dismissed for shortfalls when software compliance has gone unnoticed. These are not just scare stories, given the increased scrutiny of risk in all businesses, either internal or government driven, it is clear that Software Asset Management and Regulatory Compliance will continue to dominate the headlines.
In Lime2's experience, only 2 customers have had a 100% clean bill of health. Again this statistic is not trying to scaremonger, it is a plain fact and for Oracle it is often due to the following reasons:
• No license keys - no need to activate or do anything, you can use it as much as you like with no controls or safeguards in risks/costs
• Easily use chargeable features, with no controls
• Failure to license back-up/failover environments
• Complexity of license models
• Licensing virtual environments
• Removing leavers- staff are not removed from key systems when they leave the business
As most Oracle customers are aware, Oracle LMS (Oracle License Management Services) are Oracle’s own auditing team,enacting 1000’s of customer audits every year. They are a separate team from Oracle Sales, Business Practices, and Oracle Support. Given the potential multi-million dollar risk exposures, controls and audits should be mandatory. The key here is to factor in the cost of license auditing when systems are designed, and commissioned, not afterwards when getting budgetary sign-off is difficult. A cost factor % of the system cost should be including enabling regular license audits in the cost justification of building the system.
Support Cost Reductions
Much has been said when it comes to reducing support costs in Oracle licenses. In practice this is quite difficult to achieve depending on how the licenses were acquired and what discounts achieved. It is something that a short review can conclude will be beneficial or not. The key here is whether support renewals have been consolidated. Replacing Oracle Support for third party vendors has also taken off in the last 5 years, this is however attracting a lot of legal battles, where Oracle is trying to protect its revenue streams.
We feel that bigger benefits can and are driven from risk avoidance through compliance and system architecture and commercial agreements, rather than eliminating support. This is due to Oracle stretching the support renewal cost to include the discount before you can claim any benefit.
The Cloud Approaches
As Oracle pushes harder into the Cloud Market, they are incentivizing staff to sell cloud products and services. These will give greater discounts on traditional onsite purchases, however the benefits apart from cost are not yet transparent. Even if Oracle are seen as one of the top 5 cloud companies, there is still a considerable argument that the data Oracle is providing is too mission critical to place in the cloud, however, as Oracle are being driven in this direction, we are expecting to see significant changes in their license strategy over the next 2 years.
Conclusion
Each of the above areas should be taken into serious consideration holistically, so that not only can the benefits overlap, but also the direction and the future state of an organization’s investments in Oracle are fully achieved successfully.
We expect that the following challenges will continue in to the mid-term, 2-5 years.
• Significant change in licensing policies due to cloud adoption
• Increased audit activity in the mid-market
• Push for more uniform Master Service agreements
About the Author: Alex Andrew, Director of Lime2, has been helping with Oracle customers and their licensing for over 10 years.
About Lime2 LTD: A pure play Oracle Licensing technology tool vendor, simplifying the way customers understand and quantify their risks.
The views expressed in this document are those of Lime2 LTD, and reflect work conducted over the last 10 years, with real life examples from customers globally.
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