Oracle negotiation is challenge for most IT procurement and vendor management professionals. Oracle is less transparent about their pricing and business practices which ends up resulting in companies recieving very different results from their Oracle negotiation. This article is here to help you with your Oracle negotiation strategy it covers Oracle license negotiation and Oracle renewal negotiation. You can use the information for all kinds of scenarios including software licensing, cloud and renewal negotiations. Redress Compliance are oracle negotiation experts and have an oracle negotiation service if you need more help.
This flow chart is to describe how it works internally at Oracle. There are some variations depending on what type of product you’re buying from Oracle, but generally this is how it looks. So we can start looking at the Oracle customer data. If you consider, in your company, you probably have an approval process for how up you need to go, depending on how big investment you’re about to make. And it’s working almost the same thing with Oracle, the more discount you want, the higher up in the approval chain, the need to go to get approval to give you that contract with that discount. Depending on what contract term you want to negotiate, you go different levels in the approval chain at Oracle. There are some approval items that are very easy to negotiate, some can be approved by the sales rep, some can be approved by the manager, some by the director, some needs to be approved by Oracle HQ.
If you understand that, you can actually work together with your Oracle account team and you might ask them, “if I want to negotiate this contract term, is it difficult or easy?” They might be honest to say, “It’s very difficult for us to negotiate,” or they might say, “My manager can approve this. I don’t think this would be a problem.” Many customers are requesting changes to contract items that all end up at the Oracle HQ. The more difficult request you’re making, the less likely it is that the Oracle account rep will be able to give you the contract terms you need. Oracle account reps are not measured on what contract terms you put into the contract. They are measured on revenue, or if it’s about cloud, when are you start to consume or if it’s a static consumption, when does your cloud contract begin.
They have no interest in saying ‘No’ to contract items. Usually when they say ‘No’ to a contract item, it is usually because they have to go very high up in the approval chain. And let’s go back to the flow chart. We had Oracle customer and we are looking at negotiating in an on-premise contract. We go to your account rep. The account rep does not have any mandate. They can offer you a few contract items, but they cannot offer you discounts, they cannot offer you anything of value. They cannot offer much help. What I advise everybody to do if you have an account rep, go and ask them how long have they been with Oracle, check their LinkedIn profile. If they’ve been with Oracle for one or two years, they might actually struggle to get your contract approved internally, because some people are not good at making internal business cases, because whatever we are negotiating with the account rep, he or she then needs to go internally, write written business justifications explaining why these discounts, why these contract items.
And that goes up to approval chain, depending on what discount, depending on what contract items are being asked for, it goes up to different levels inside of Oracle. And here it’s to be able to have an honest conversation with your Oracle account rep, “How difficult is it to give me these contract items?” Because you might have a list of 20 contract items you want to negotiate. This one contract item, for some reason, needs to go at the highest approval level at Oracle. And it’s not really that important for you. If your account rep can tell you, “I need very high up for this contract item. Is it really important for you to have it?” You might say, “No, it’s not that important. Let’s focus on everything else.” All ULA deals, all non-standard contract deals, very high discounts need to be approved by the highest level at Oracle. Helpful to understand Oracle sales reps, directors, counter managers, they don’t really have that much mandate to approve anything.
They can approve lower level discount of your contract items. If you want to have great discounts, customized contracts, it needs to go through a business approval process at Oracle, and it might fail if the account manager is not good enough at justifying why you should have this discounts or the contract items. What can be helpful is to ask the account rep, “Do you need any help for me to build a business case?” Also, be aware, it can take weeks for an advanced contract to be approved at Oracle. It means that you should not start the last week of an Oracle quarter.
1. Is the ordering document referencing your Oracle OMA?
Make sure that your Ordering Document is referencing your OMA to make sure that your new license purchase is bound by your OMA terms. We often see that there are mistakes where subsidiaries are signing new OMAs instead of using the OMA that was signed on parent company.
2. Negotiate the customer definition in your Oracle license agreement.
Which legal entities/companies will use and access Oracle Software, now and in the future?
Find “customer definition” in your Oracle Ordering Document:
Customer definition: You will have 2 options when negotiating with Oracle
1) You can list all entities that are now and in the future going to need access and use Oracle Software.
2) Oracle has a standard clause allowing parent company and all majority owned subsidiaries to be included in the usage rights.
If you do not negotiate this clause, the only legal entity that can access Oracle Software is the one listed on the Oracle Ordering Document or in the Oracle OMA.
I recommend that you if possible sign all license agreements on parent company and simply use Oracle standard clause “all majority owned subsidiaries” because then you it will cover acquisitions.
3. Negotiate the territory clause in Oracle software license agreement.
In which countries will you physically deploy your servers that will run Oracle Software?
Territory in the ordering document – The territory clause provides you with usage right to deploy servers to run Oracle Software. Standard term is to only allow you to deploy in the country of purchase.
I recommend that you ask for worldwide usage. If you do not do so, you will not have the ability to move Oracle deployments to another country or use a cloud data region that is outside of your usage rights. Worldwide usage is almost always approved by Oracle.
4. Negotiate Oracle technical support increases
Oracle support costs will increase by 4% annually, how do you avoid/control that rising cost?
Which contract term:
Technical Support the OMA and/or Ordering Document: Key to Oracle success is their support policies. When you talk about “vendor lock-in” with Oracle, it is how their support policies are written. They will prevent you from making partial terminations of unused software and having you to pay for software that you no longer use. The support will also if not negotiated increase by 4% annually.
I recommend that you at the time of purchase negotiate a 0% increase for up to 5 years.
5. Oracle negotiation merger and aquisitions
If you divest a legal entity, can they continue use the licenses that you have purchased?
Assignment rights in your Oracle Ordering document: You should ask Oracle to include assignment rights to allow the divested entity to continue using Oracle Software for up to 12-24 months. That will allow the legal entity to either move off Oracle and or purchase their own licenses when the assignment period is over. If you do not have this clause and you ask Oracle for the usage right. Oracle will ask for payment to amend or add this usage right.
6. Negotiate a fixed price for Oracle products.
Do you need fixed pricing for future purchases to avoid negotiating discounts at every new purchase for the coming years?
I don’t recommend signing a price hold as sometimes you can receive better commercial terms by negotiating each purchase as a stand alone deal. Also pay attention that price hold can also lock you into support agreements, where you will be unable to terminate unused licenses and support.
Ask Oracle for a “Price hold”: If you want to have fixed pricing, Oracle can grant you a “price hold” for either specific products or the whole technology price list. This can be negotiated at the time of a large purchase or negotiated as part of an OMA renewal. The benefits of having a price hold is that you do not need to negotiate every purchase it also allows companies that have a decentralized purchasing to negotiate an OMA and price hold on a parent level. Then each subsidiary that needs additional licenses simply contact Oracle in each country and purchase based off the discounts approved along with the terms.
One of the few clauses that Oracle use in license reviews. They’re looking at the customer definition when they’re auditing their customers. When it comes to just a normal volume purchase, it can also be a bit more flexible on the customer definition and just include all majority on subsidiaries. It’s recommended that you include them, so you don’t have just a customer and information, which is covering one [inaudible 00:00:21].
The Territory clause is, where can you deploy, and where are your users located? You need to negotiate that as wide as possible to avoid compliance issues and audits. The Extended Support Waiver, it should be negotiated to both in the ULA’s, but also on On-Premise contract. Technical Support caps, it’s increased to 4% year-on-year. You can, at the time of purchase, negotiate the zero percent cap for up to five years. We’ve seen that happen, but it can also be done on an annual basis. So let’s say that you have support where you are now, you can try to negotiate the zero percent increase, even though if Oracle have applied it, you can ask them to remove that increase.
Licensing test and development is also a very important contract term to include in your On-Premise contract. Normally you have need to license test and development environment, but you can negotiate a special licensing model for test and development, which will reduce the licensing costs for those environments, but by 60%. The Oracle Audit clause, you need to pay attention to, as well. Now, Oracle changed their audit clause in 2019. From the old Oracle clause, did not mention you’re running their audit script and in the case of an audit. Design a new [alma 00:01:27] now, whichever new audit clause, it is more in leverage for the software vendor, if there’s an audit. And I would try to remove text around running their audit script.
Seven, price hold. Microsoft and other vendors are removing discount for On-Premise software to push their customers to cloud. It might be the case where you want to buy the On-Premise software, maybe next year, maybe next year after. And our work is going to say there’s zero percent discount from On-Premise, but if you move to the cloud here, it is going to be a much better discount. What you should be doing right now, for any purchase, you go to Oracle and say, “I want to have a five-year price old for On-Premise software, and I want to have it for the whole price.” Because that’s going to give you the flexibility to choose. Am I going to go to On-Premise or you could buy it On-Premise and take it to Amazon or Azure, or you want to go to Oracle cloud? It’s all about giving yourself options for that.
Answer: It’s called a preliminary report. It’s a preliminary report for a very good reason. Oracle wants you to confirm that their findings are correct.
Answer: You might have given Oracle the wrong information on your Oracle deployments, backups or number of users. Oracle wants you to review all the information to make sure there are no mistakes.
Answer: Oracle often makes other mistakes: they miscalculate licensing, they don’t review your contracts properly or they simply miss licenses that you have. The list of possibilities is very long.
Answer: No, it’s simply because in recent years Oracle LMS has replaced their audit org. Many Oracle LMS auditors have only a few years of Oracle licensing experience. To be good at Oracle licensing you need to have many years of experience, it’s the same for Oracle own audit teams.
Answer: Oracle will always assume “worst case” licensing as in most expensive licensing. I think this is the area where I believe Oracle are doing their customers a disservice. There are many licensing models for Oracle SW. Oracle will always position the worst case when solving a Oracle license audit. Even if the company can resolve the audit at a much lower cost with a different licensing model.
For example Oracle will claim processor licensing is required when you can often license with users at half the cost.
Answer: No, you should always acknowledge you have the report and will review and get back to Oracle. Never say you agree with the report, as then the 30 day period begins when you need to resolve any license gap with Oracle Commercial teams.
Answer: Sure, you can, but expect discounts to be in average 30-40% lower. If your company received 60% in the past when purchasing Oracle software, you might only get 20-30% for the purchases that are related to the audit.
Answer: Oracle will throw the whole “book” at you. The key to decipher the report is to understand what Oracle expects you to pay for and what not to pay for. It’s like any negotiation where they start as high as they possibly can to maximize the starting point of the negotiation. There are many items in the audit report that some customers pay for and other customers do not pay for.
Answer: Yes, I am. Ultimately your performance in a Oracle license audit depends on your knowledge, negotiation skills and your determination to pay zero. Without one of the three you will not succeed. This is why it’s valuable to work with expert firms who can share what are other companies paying for, so your company is not overpaying.
Answer: Tell Oracle that they are doing it wrong, if you haven’t confirmed the findings.
Oracle have the right to do so, but it is unheard of that Oracle does that. Especially after 30 days. If that would ever happen, it means you have most likely refused to pay settle the Oracle license auditfor years and Oracle has strong evidence you are using their software without the proper licenses.
Yes, the rule of thumb is that you can extend Oracle license audit negotiations it until the end of Oracle FY. (end of May) They do not want to extend it beyond this date
No, this is not possible anymore. You will need to purchase on premise software licenses.
Yes, usually if these items are discovered in combination of missing licenses Oracle might waiver them if you purchase on premise software. However, if there are no gaps and the only issues identified are in the contract, Oracle will often request you purchase new software. This is another case in which Oracle treats customers differently, and much depends on who at Oracle are negotiating the audit.
No, Oracle lets you make your own calculations by adding up the licenses that you are missing. You can see how many licenses you are missing and then the Oracle price list is available on Oracle website.
Almost every single one, there are substantial errors. Oracle is always assuming that you need worst case licensing to be compliant. It may be difficult to comprehend, but Oracle makes mistakes. It’s a big company with many people and there are some auditors who have very little knowledge about Oracle Licensing. Unfortunately, it’s the customers who are paying the price.
Yes, you do. Even Oracle DBAs with 10-20 years of experience are struggling to understand which features requires a license and what does not. However, if you review your Oracle licensing yourself you can obviously spot these issues before Oracle discoverduring the license audit.
Make sure you document in an amendment with Oracle, why you are acquiring these licenses. Usually what happens is that non-compliant for product A, but you then purchase product B as you do not need product A (used by mistake). It is then very important you have clear documentation as backup if Oracle knocks on your door in 3 years and find the same Oracle license compliance issue.
Best time to engage an Oracle licensing expert is before the audit begins to avoid a messy situation. If you identify any issues before the audit begins, you can often amend them all before the Oracle license audit begins. If you wait until there is a report, you are negotiating down an amount, but you will not pay zero, as you would do before the Oracle license audit.
Yes, they will. Oracle simply lists the number of CPU licenses you need to license. However, Oracle licensing on virtual environments is not black and white. If you are having these discussion with Oracle you should have an Oracle licensing expert advise you on these discussions.
We urge anyone to communicate to Oracle that they do not want to speak to the Oracle account team at this stage. You want to review the report and adjust errors with Oracle LMS. If you engage the Oracle salesteam you are agreeing to the findings and often the account team has less knowledge about how to license Oracle than you do.
The only difference is that you have agreed with the findings in the final report and are contractually obliged to resolve the license shortfall within 30 days. Pro tip, don’t agree with the Oracle license audit report findings as then the clock starts ticking.
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Redress Compliance are oracle negotiation experts, if you need an Oracle negotiation strategy contact us as we have different services that can help you. We can help you both with an Oracle renewal negotiation as well as an oracle license negotiation. We can also help you negotiate your Oracle support renewal, contact us to discuss how our Oracle negotiation service can help you.