Oracle negotiations 101: Is there any leverage?

Oracle negotiations 101: Is there any leverage?

Summary: Oracle is widely seen as the toughest vendor in negotiations with technology buyers, but there are a few tactics to use to cut deals. And most of them revolve around helping out Oracle's sales folks, according to Forrester Research.

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Oracle is widely seen as the toughest vendor in negotiations with technology buyers, but there are a few tactics to use to cut deals. And most of them revolve around helping out Oracle's sales folks, according to Forrester Research.

Forrester's tips for negotiating come as Oracle wraps up its Collaborate conference in Orlando. At the conference, Oracle announced feature packs for PeopleSoft financial and supply chain modules, support timelines for JD Edwards software and a new version of the AutoVue enterprise visualization app.

The problem: All of these products will ultimately result in potential negotiations with Oracle---and that's not fun. Forrester's Duncan Jones noted in a report:

Many of the sourcing and vendor management professionals that speak with Forrester each year tell us that Oracle is their toughest vendor. You complain about the sales team’s unwillingness to negotiate licensing policies that you believe are unreasonable and the challenge of finding good negotiation leverage. Let’s face it, for most of you, Oracle’s products are strong (its products are Leaders in two thirds of Forrester Wave™ reports that include them) and so entrenched in your organization that you have to accept it as a key supplier for the foreseeable future.

So what can you do? Forrester says first you have to know how Oracle works. To wit:

  • Oracle targets your top executives so you can't push back when a deal lands on your desk. Discounts come in volume so small purchases are out. Your only real move is to save money and balance that with long-term support.
  • Oracle has to upsell you because it can't hit its revenue targets just selling new products to willing buyers. There's a push for more licensing deals. That's why per-core licensing exists---there's revenue even if customer rolls shrink.
  • Oracle doesn't allow contract changes and amendments are tightly controlled.
  • Maintenance is everything. Oracle grows its maintenance revenue 10 percent a year on average by new sales, annual increases and minimizing leakage.

With that backdrop, Forrester offered five tips. We'll go through them briefly. Also: Oracle's potential math problem: Worrisome licensing trends ahead; Art of the software deal can get messy

Stay in the negotiation and figure out how to buy. Forrester writes:

The software sourcing professional must combat Oracle’s strategy to isolate you from the sales process. It trains its sales reps to avoid commercial discussions until it has convinced your colleagues to buy its product, so by the time you get involved you have neither time nor leverage to negotiate effectively.

To counter this move, the IT buyer has to work with the higher up to agree on how they want to buy Oracle gear. Forrester recommends buying unlimited license agreements in multiyear deals. Oracle's sales reps get commissions sooner and the company brings revenue forward. You get a nice discount and a simple license model.

Help the sales rep write a deal summary. Oracle has centralized approvals for software deals. In other words, the rep can't just give you the deal you want. The rep has to submit a case outlining customer context, products needed and concessions. The IT buyer has to help the rep write this narrative, which should include maximizing the deal size, identifying future revenue opportunities for Oracle, vertical applications and business reasons.

Make sure governance knows the full cost of Oracle software. Any deal with Oracle needs to project growth in the number of per-core licenses, rising maintenance fees over multiple years and more users.

Line up products with discounts. Discounts aren't so hot if you really don't need the software. Understand the products and figure out if you really need them. Cut non-essential apps, but put on a price hold list.

Negotiation licensing and maintenance terms at the same time. Once the licensing deal is signed, you have no maintenance leverage. Oracle will just bill you and withhold support until you pay maintenance. But you can get maintenance amnesty terms when you do an initial licensing purchase.

Topics: Banking, CXO, Enterprise Software, Government, Oracle, IT Employment

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  • Oracle does this because customers let them get away with it.

    First: talk to your management and executives. Explain Oracle's sales strategy, and ask them if they approve of it. In my experience, they don't like the thought of being railroaded. This way you walk into the negotiation with real authority to simply say 'no' and walk away. That is the *real* negotiating power.

    Second: do your research and know your options. There are many lower cost alternatives, and if you know how they fit into your environment then you have an alternate plan -- enabling you to credibly use your 'no' power.

    If you can credibly say 'no' then even Oracle's sales-weasel will have to negotiate -- or he loses the sale and has to go back to the office and explain why.

    They don't like that, so if your conditions are reasonable, then they usually make a deal.

    Just my $0.02 USD speaking from experience.

    Regards,
    Jon
    JonathonDoe
    • But you make it sound so easy!

      @JonathonDoe How are Forrester's over-paid analysts supposed to write fancy reports when you are here simplifying things?

      Where I work the execs are so hyper-sensitive to cost that I dont see them falling for Oracle's tricks.
      otaddy
  • RE: Oracle negotiations 101: Is there any leverage?

    Following Forrester's advice and simply doing an unlimited three-year deal is damaging at least and career-ending at worst. Companies who are tired of paying outlandish support fees (especially on products they're not using) to Oracle should contact a consultant to assist (making sure that the consultant isn't also an Oracle reseller). Leverage with Oracle comes from doing thousands of deals with them and knowing their practices and how to counter them.
    negot8or
  • Just switch to SQL DB

    Cost per DB is less expensive, support is less expensive, software cost are less expensive, it supports process not core licensing, it's just as widely accepted, it offers many of the same features of Oracle bundled in....

    ERP wise Oracle is obviously a well known brand but Dynamics AX is a LOT less money. MS-CRM is significantly less than Siebel.
    jessiethe3rd
    • RE: Oracle negotiations 101: Is there any leverage?

      @jessiethe3rd
      Isn't that like telling a bulldozer operator to just buy a shovel and a wheelbarrow? Not in the same league, sorry.
      914four
      • RE: Oracle negotiations 101: Is there any leverage?

        @914four
        Sometimes people use bulldozers when shovels could do the work better.
        But you are right, you cannot tell that to bulldozer operator. The same goes for oracle experts. You do not tell them to switch because they are getting paid for their Oracle expertise and mask their lack of MS SQL knowledge by shovel and wheelbarrow arguments ;)
        paul2011
      • RE: Oracle negotiations 101: Is there any leverage?

        @Paul2011<br>So, you are telling me that MS-SQL is now able to scale a single common database across multiple nodes? I know MS supporters have made light of this for years, but then that's why systems developed in MS-SQL that suddenly grow so often get ported to Oracle.
        (edited to fix a typo)
        914four
  • RE: Oracle negotiations 101: Is there any leverage?

    Negotiate with Oracle? Why? There is absolutely no need. There are real alternatives. If you run an app like SAP, buy Oracle from SAP, this way you pay pennies on the dollar vs. buying the same software from Oracle. For all other applications consider consolidating Oracle instances or just go MS-SQL or DB2. Both of which are way cheaper. Oracle does play hardball, but it is also clear that they are slowly becoming a niche player. Hardware purchase of Sun was a big mistake that leaves them cornered. Add to that the fact that fully compressed databases of 70TBs run on MS SQL server and we have something going. Before you jump all over me on the MS-SQL and 70TB...talk to your Microsoft rep for the reference or your Gartner analyst. Just because you have not spoken to companies that have done it, it does not mean that it does not exist.
    mikies
  • RE: Oracle negotiations 101: Is there any leverage?

    The following categories of people buy Oracle:

    a. People who are wined and dined and golfed by Oracle
    b. People who don't actually know how to use the products nor know the nitty-gritties of using the software. People who know will know that alternatives are just as good if not better, and certainly cheaper. These are the people who need Oracle consultancy hours.
    c. People who are spending someone else's money, ie not shareholders, not stakeholders.
    d. And of course, people who are already locked in.

    When you buy your first Oracle license you are stuck. Oracle can price the maintenance costs to just below your migration costs which is huge as it covers risks, time lost, down time, etc.
    kingkong88@...
    • RE: Oracle negotiations 101: Is there any leverage?

      is this not the case with all vendors
      drewit