Oracle Support Renewal – Optimization And Lower Costs

What are the best ways to reduce Oracle Support Renewal Fees

• Third-Party Support: Consider providers like Rimini Street for up to 50% savings.
• Terminate Unused Licenses: Stop paying for non-utilized licenses.
• Downgrade Versions: Switch from Enterprise to Standard editions.
• License Optimization: Adjust license models for potential savings.
• Cloud Transition: Migrate to Oracle Cloud or alternatives like AWS or Azure.
• Hardware Changes: Consider platforms like IBM LPAR for cost benefits.
• Negotiate with Oracle: Engage in discussions for potential discounts.
• Stay Updated: Keep software current to avoid higher fees for outdated versions.
• Please read our latest trends for how to reduce Oracle support fees in 2024

Introduction to Oracle Support Renewals

Purpose of Optimizing Oracle Support:

Oracle Support costs can overwhelm businesses, especially large enterprises with complex software environments. The high fees often burden the IT budget considerably, impacting a company’s ability to allocate resources elsewhere. Optimizing Oracle Support can significantly reduce these expenses, freeing up financial resources to invest in growth and innovation.

Optimizing support is about getting the most value for your money. This means reducing wasted spending on unused licenses, renegotiating contracts for more favorable terms, and exploring alternatives like third-party support. Businesses that succeed in optimizing their Oracle Support can often use their savings to enhance other aspects of their IT infrastructure.

Key Challenges in Oracle Support Costs:

• Inflated Fees: Oracle’s annual support costs are typically 22% of the original license fee, which can become a considerable expense over time.
• Complex Contracts: Oracle’s licensing and support contracts are often complex, with clauses and conditions that can be challenging to understand and negotiate. This makes it difficult for businesses to identify potential areas for cost savings.
• Unused Licenses: Many companies continue paying for support on licenses they no longer use or need, leading to unnecessary expenses. These costs accumulate without proper tracking and regular review, adding to the financial burden.

Optimizing Oracle Support means tackling these challenges directly—understanding the contracts, identifying what is needed, and eliminating excess.

Read Reducing Oracle On-Premise Support Fees: A CIO’s Guide.

Third-Party Support as an Alternative

Consider Providers like Spinnaker Support or Rimini Street:

One of the most effective ways to reduce Oracle Support costs is to move to third-party providers such as Spinnaker Support or Rimini Street. These companies support Oracle products at a fraction of Oracle’s standard rate, often saving up to 50% or more.

Potential Savings:

• Up to 50% of support costs can be saved by moving to a third-party provider compared to Oracle’s fees.
• These providers offer tailored support plans that match the company’s specific needs, allowing businesses to pay for only what they require.

Pros and Cons:

• Advantages:
  • Cost Savings: The most obvious benefit is the drastic reduction in support costs.
  • Flexible Service Options: Third-party providers can offer customized support that aligns more closely with your business needs.
  • Extended Support for Older Versions: Third-party support providers often continue supporting older versions of Oracle software beyond what Oracle offers, giving businesses more flexibility.
• Drawbacks:
  • Loss of Access to Oracle Patches and Updates: Moving away from Oracle means that businesses will not have access to the latest patches and security updates that Oracle provides.
  • Risk in Upgrades: Lack of official Oracle support can complicate upgrading to newer versions, requiring more planning and potential costs.

Case Example:

A mid-sized manufacturing company faced rising Oracle support costs, which consumed much of their IT budget. They moved to Rimini Street, which offered equivalent support for 50% less than what Oracle charged. The move saved them over $500,000 annually, funds they could reinvest into upgrading their IT infrastructure, leading to improved productivity across the company.

Terminate Unused Oracle Licenses

Identify and Remove Unused Licenses:

Unused Licenses Identification:

A significant portion of Oracle customers pay for licenses they don’t use. Conducting a license audit is the first step in identifying such unused licenses. Tools that monitor software usage can help determine which licenses are inactive. Regular audits of license utilization are crucial to pinpointing underused or unused licenses.

Benefits of Termination:

• Cost Reduction: By identifying and terminating licenses that are not being used, businesses can significantly reduce their support renewal costs. Removing support for unused licenses directly reduces yearly fees without impacting operations.
• Optimized Spend: With fewer licenses to support, the budget can be optimized, and funds can be reallocated to more critical IT investments, boosting efficiency and growth.

Oracle’s Matching Service Level Policy:

One critical aspect to consider when terminating licenses is Oracle’s Matching Service Level Policy. This policy requires that all licenses within the same product family must be covered under the same support level. This means that if a company wants to terminate support for certain licenses, they may need to do so across all licenses of that product family—making partial termination challenging.

Example:

If an organization holds licenses for multiple Oracle database products, it cannot drop support for just a few licenses while keeping support for others at the same level. Instead, they would need to reduce the support coverage for all licenses within that set. Therefore, planning terminations is crucial to avoid unexpected compliance issues and ensure compliance with Oracle’s policies.

Downgrade Oracle Versions

Switch from Enterprise to Standard Editions

Enterprise vs. Standard Editions: Organizations opt for Oracle’s Enterprise Edition in many scenarios without critically evaluating their requirements. While powerful, Enterprise Edition often includes features that go unused. Downgrading to Standard Edition can significantly reduce costs, especially if advanced features like partitioning or security are unnecessary.

Examples of Downgrade: Consider an organization using Oracle Enterprise Edition solely for basic data management. If they are not using advanced features like Real Application Clusters (RAC), Downgrading to Standard Edition may yield similar functionality at a reduced cost. For instance, a company running internal business applications without high availability could benefit by switching.

Considerations for Downgrading: While downgrading can be cost-effective, it has limitations. Companies must assess compatibility issues, understand the features they are forgoing, and determine if the Standard Edition will support future growth. Downgrading could limit access to advanced features that might become necessary as the organization scales.

License Model Optimization

Adjust License Models for Savings

Switch from Processor-Based to Named User-Plus Licensing: Processor-based licensing is ideal for high-volume environments with numerous users but can become extremely costly if not properly managed. On the other hand, named User-Plus (NUP) licensing allows organizations to license based on specific users rather than processors, which can be highly beneficial for environments with fewer users accessing large servers.

Explanation of Different License Types:

• Processor-Based Licensing: Charges are based on the number of processors running the software. This benefits many users accessing the system, making per-user licensing impractical.
• Named User-Plus Licensing: Charges are based on the number of unique users accessing the software. This model can save costs in scenarios with fewer users or environments that do not require constant system-wide access.

Case Study: A financial services company had been using Processor-Based licensing to run several Oracle databases. After an internal audit, they realized that only a few core team members accessed most databases. By switching to a Named User-Plus licensing model, they reduced their Oracle costs by 50%. This approach allowed them to precisely tailor their licensing requirements, cutting unnecessary expenditures.

Cloud Transition

Migrating to Oracle Cloud or Competitors (AWS, Azure)

Benefits of Moving to Oracle Cloud: Migrating to Oracle Cloud Infrastructure (OCI) can simplify Oracle license management and provide greater flexibility in resource consumption. Oracle Cloud is built to integrate seamlessly with Oracle software, meaning less complexity and reduced costs when scaling up or down. Moreover, Oracle offers specific pricing and incentives for moving existing on-premises workloads to OCI, which could reduce overall support costs.

Transitioning to AWS or Azure

Oracle BYOL (Bring Your Own License): One attractive option is Oracle’s Bring Your Own License (BYOL) program. It allows organizations to move their existing Oracle licenses to a cloud platform like AWS or Azure. This enables them to avoid purchasing entirely new licenses, leveraging the flexibility of cloud environments while maintaining compliance.

Considerations for Moving to Cloud: Cloud migration has its pros and cons. Benefits include reduced hardware maintenance costs, scalability, and better disaster recovery options. However, challenges involve potential compliance issues, dependency on internet connectivity, and possible difficulties with data migration. For organizations looking to move to AWS or Azure, Oracle BYOL provides an avenue to maintain licensing compliance while taking advantage of cloud features like scalability and pay-as-you-go pricing.

Leverage Hardware Changes for Cost Benefits

Platform Changes like IBM LPAR

Hardware changes can be pivotal for organizations looking to optimize Oracle support costs. Companies can significantly reduce their Oracle licensing requirements and costs by strategically choosing specific hardware platforms, such as IBM LPAR.

• Cost Reduction via Hardware Platforms: IBM Logical Partitioning (LPAR) allows businesses to consolidate Oracle workloads efficiently. LPAR can restrict Oracle software deployment to fewer processors by virtualizing and partitioning hardware resources. This targeted use of fewer processors can drastically reduce licensing requirements, directly impacting cost.
• Practical Example: Consider a manufacturing company that decided to move to an IBM LPAR platform. With IBM’s partitioning capability, they could reduce the number of active processors running Oracle software by 40%. This led to a corresponding 40% reduction in licensing fees, resulting in significant cost savings for Oracle support.

Negotiating with Oracle

Effective Negotiation Tactics

Negotiating with Oracle can be a powerful tool in optimizing support costs. However, it requires understanding Oracle contracts, strategic timing, and effective leverage.

• Understand Oracle Contracts and Leverage: Before entering negotiations, it’s essential to thoroughly understand the terms outlined in your Oracle agreements. Identifying clauses related to renewal rates, termination terms, or volume discounts can help highlight areas where you have leverage.
• Secure Discounts and Avoid Unnecessary Costs:
  • Renegotiate Support Terms: One area to target is the annual uplift fees. Oracle often increases support fees by approximately 8% per year. However, many companies have successfully negotiated this uplift to a lower rate or even avoided it altogether.
  • Leverage Your Buying Power: Timing is crucial. Oracle’s fiscal calendar ends in May, with important quarter-end periods in August, November, February, and May. Approaching negotiations at these times can increase your chances of securing a discount, as Oracle sales teams are often motivated to meet their targets.
• Negotiation Strategies Example: A large retail company approached Oracle just before the end of a fiscal quarter. By highlighting their large, upcoming contract and expressing hesitation over the current renewal rate, they successfully negotiated a 10% reduction in their support costs. The key was timing the negotiation to coincide with Oracle’s need to close contracts before the quarter ended.

Stay Updated with Software Versions

Avoid Fees for Outdated Versions

Another practical approach to Oracle support optimization is staying updated with software versions. This ensures you avoid unnecessary fees that can accumulate with outdated software.

• Oracle Extended Support: When software versions become outdated, they often enter the Extended or Sustained Support phases. These support tiers are not only more costly but also offer reduced benefits. For instance, Oracle may charge an additional 10-20% on top of regular support costs to continue supporting outdated versions.
• Upgrade Regularly: Organizations should plan upgrades well before software enters Extended or Sustained Support to avoid paying inflated fees. Keeping Oracle software within the Premier Support phase ensures that companies receive all relevant updates, patches, and comprehensive support at a lower cost. This proactive approach helps avoid vulnerabilities arising from unsupported software versions, saving money and maintaining a secure IT environment.

Key Considerations Before Renewing Oracle Support

License Review Before Renewal

Before renewing Oracle support, conducting a thorough license review is critical. Ensuring you pay only for the licenses you need is the first step in managing Oracle costs effectively. Here are two key strategies:

• Active License Utilization Check: Review which Oracle licenses are actively being used. Many organizations continue paying support fees for licenses that are either dormant or unused. Regular assessments help identify such inefficiencies, ensuring you only renew necessary licenses.
• Annual Oracle License Optimization: Conduct proactive license optimization at least once a year. This can reduce the licensing footprint by up to 30%. Identifying areas where you can consolidate or eliminate unnecessary licenses can save significant costs when renewing.

Oracle Technical Support Policies

Understanding Oracle Policies to Your Benefit

Oracle’s support policies can be complex, but understanding them can help you reduce unnecessary costs. Three major Oracle policies are key to cost management:

• Matching Service Levels Policy
  • Explanation: Oracle requires all licenses in a given set to be supported at the same level. This “all or nothing” approach can make it difficult to drop support selectively.
  • Implications: To optimize costs, it’s essential to understand how the Matching Service Levels Policy affects your licenses. Some strategies for managing costs efficiently include negotiating alternative support models or considering third-party support.
• Reinstatement Fees
  • Explanation: Oracle imposes a penalty fee if support lapses and you wish to reinstate it. These reinstatement fees can be hefty, calculated at 150% of the last paid support cost plus backdated support fees.
  • How to Avoid Them: Carefully plan any support termination and ensure it’s permanent. If you need support again, consider a third-party option that may avoid costly Oracle penalties.
• Repricing of Technical Support
  • Explanation: Repricing occurs when licenses are partially terminated. The remaining support costs are recalculated, often reverting to a list price rather than retaining the volume discount from the original purchase.
  • Implication: Support costs may not be proportionately reduced after dropping licenses. Therefore, it is vital to understand how Oracle calculates these costs and prepare a strategy to avoid excessive spending.

Top Strategies to Reduce Oracle Support Costs

Reducing Oracle support costs requires a multi-faceted approach. Below are the top strategies to help manage and lower support fees:

• Third-Party Support
  • Switch Providers: Switching from Oracle’s support to third-party providers like Spinnaker Support or Rimini Street can result in up to 50% cost savings. This move is particularly useful for older, stable software versions where updates from Oracle are not essential.
• Evaluate License Usage
  • Terminate Unused Licenses: Regularly assess your Oracle license usage. Terminate any idle or unnecessary licenses to avoid paying support for assets that provide no value. This strategy alone can yield significant savings.
• Downgrade and Optimize Licenses
  • Model and Edition Optimization: Assess the editions and license types in use. Consider downgrading from Oracle Enterprise Edition to Standard Edition if your use case allows it. This move can lead to substantial cost reductions without sacrificing essential functionality.
• Migrating Environments to Oracle Cloud
  • Moving Dev/Test Environments: Transitioning development and testing environments to the Oracle Cloud can lead to considerable savings. By leveraging Oracle Cloud’s pay-per-use model, you can avoid paying perpetual licensing costs for environments not continuously used.
• Hardware Changes
  • Switch to Efficient Platforms: The choice of hardware can impact Oracle licensing requirements. Switching to efficient hardware platforms like IBM LPAR (Logical Partitioning) or similarly consolidated platforms can reduce the licenses needed, cutting costs significantly.
• Negotiate Directly with Oracle
  • Negotiation Tips: Ask Oracle to waive or reduce the yearly 8% support price uplift. Better terms are possible, especially during Oracle’s fiscal year-end periods, when It may be more willing to offer concessions to meet sales targets.
  • Manage Costs: Negotiate lower fees and extended support terms by leveraging upcoming renewals, a long-standing customer relationship, and your understanding of Oracle’s complex policies.

Case Study: Cost Savings in Oracle Support

Background of the Case

A leading telecommunications giant in Europe faced escalating Oracle support fees threatening to burden its financial operations.

The organization, which relied heavily on Oracle’s software for its IT infrastructure, was looking to reduce these substantial costs while continuing to access the essential support needed for its day-to-day operations. They turned to an expert consulting team specializing in Oracle licensing optimization.

Challenges Faced

• Escalating Support Costs: The telecom company’s Oracle support costs ballooned to nearly €10 million annually, becoming a significant financial strain.
• Complex Business Objectives: Beyond the cost, the company needed to ensure its Oracle software remained updated and fully supported to avoid disruptions to critical business services.
• Limited Flexibility: Oracle’s Matching Service Levels Policy meant they couldn’t selectively reduce support without facing penalties, making it challenging to streamline costs effectively.

Solution Implemented

The consulting team devised a two-pronged approach to addressing the situation, combining third-party support with contract optimization.

1. Shifting to Third-Party Support:
   • After careful analysis, the company switched a substantial portion of its Oracle support to Spinnaker Support, a third-party provider. This alternative allowed the company to use Oracle software while enjoying cost-effective support services.
   • Third-party support meant the company could no longer access Oracle patches and updates. However, they managed this by analyzing their needs and deciding which software versions could be kept without further Oracle-provided updates.
2. Conducting Oracle Contract Analysis:
   • A thorough review of Oracle contracts was conducted to identify licenses that were no longer being utilized or could be optimized.
   • They used Oracle licensing experts to negotiate directly with Oracle to waive certain annual uplift fees and restructure existing agreements to be more cost-effective.

Outcomes

• Savings Achieved:
  • Immediate Cost Reduction: The telecom giant saved approximately €5 million in the first year alone by moving to third-party support and optimizing their Oracle contracts.
  • Future Savings Projection: Over three years, projected savings were estimated to reach €15 million, significantly relieving the company’s IT budget.
• CIO’s Feedback:
  • The company’s CIO, reflecting on the cost reduction measures, shared:”Redress Compliance’s excellent analysis made us confident in our decision to move to third-party support. The strategy saved us millions without compromising service quality. I highly recommend them for an external expert view to validate our Oracle strategy.”

Summary and Final Recommendations

Summarize the Key Steps for Oracle Support Optimization

Optimizing Oracle support costs can lead to significant financial savings while maintaining the necessary level of service.

Here are the key steps and strategies discussed:

• Third-Party Support:
  • When the value of new patches and updates from Oracle is not critical for your current setup, switching to a third-party support provider can offer substantial savings. However, careful consideration should ensure that ongoing software requirements are adequately met without Oracle’s direct support.
• Terminating Unused Licenses:
  • Assess all Oracle licenses periodically to identify which licenses are active and required and terminate any unused ones. This step is crucial for reducing unnecessary support payments and managing resources efficiently.
  • Regular assessments help ensure you’re not paying for any longer adding value licenses.
• Hardware and License Model Adjustments:
  • Switch Hardware Platforms: Consider switching to more efficient hardware platforms, such as IBM LPAR, which can significantly reduce licensing requirements.
  • Adjust License Models: Depending on how Oracle software is utilized within your organization, switching from a processor to a user-based license can yield significant cost savings.

Final Advice

• Regular Assessment:
  • Conduct regular reviews to identify opportunities to reduce support costs, terminate inactive licenses, and ensure compliance with Oracle’s licensing policies.
  • These assessments should be done proactively before Oracle supports renewals to position your organization for effective negotiations.
• Expert Guidance:
  • Engage Licensing Experts: Oracle’s licensing agreements and policies can be complex, with details that significantly impact cost. Engaging external experts with experience in Oracle licensing can help you navigate these intricacies, secure favorable terms, and make well-informed decisions that reduce costs.
  • Negotiation Leverage: Use external expertise to identify leverage points during Oracle negotiations. They can assist in securing discounts, waiving uplift fees, and obtaining favorable contract terms.

Optimizing Oracle support contracts involves saving costs and making smart, informed choices that benefit the organization’s long-term IT strategy.

Whether through switching to third-party support, negotiating directly with Oracle, or optimizing licenses and hardware, each action requires a thoughtful approach backed by a clear understanding of the Oracle ecosystem.

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