Feds nix Oracle blanket contract

Feds nix Oracle blanket contract

Summary: The Feds pull the trigger on nixing Oracle contracts. It will cost Oracle dearly.

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TOPICS: Oracle
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Last year Oracle agreed to settle with the General Services Administration (GSA) to the tune of $199 million in a reputation damaging case which saw Oracle accused of overcharging some government agencies. Today, we hear that as of May 17th, Oracle's GSA IT Schedule 70 contract is being terminated. To put that into perspective, last year, the government is reported to have spent some $388 million with Oracle.

Schedule 70 deals are effectively blanket purchase orders that allow federal agencies to buy pretty much anything they need from approved companies supplying IT services. The loss of this contract goes further than simply putting a block on future orders. According to Informatinon Week:

Mary Davie, assistant commissioner of the Federal Acquisition Service's Office of Information Technology Services, said in a statement only that the Oracle contract "was not in the best interest of the government."

... Due to the cancellation, agencies won't be able to exercise options on existing task orders or place new orders after May 17, and blanket purchase agreements for Oracle services made under Schedule 70 will be terminated.

Quite what this means in practice remains to be seen. It would be highly unusual for ongoing software solution implementations to be ripped yet that seems to be at least one implication from what the government is (or is rather not) saying.

In recent times, the Feds have been more disposed to favorably considering open source alternatives to proprietary software although this would likely have little impact on business applications - at least in the short term.

Neither party is commenting beyond what has already been said but it will almost certainly mean Oracle will need to go back to the negotiating table for unfulfilled contracts. In the meantime, government buyers can be sure that Oracle sales people will be all over them to maximise spend in the run up to Oracle's year end, which falls 31st May. The Feds can also be sure that Oracle will send in its audit crews, keen to wring out the most they possibly can from whatever is left on the table.

Of course this will not prevent Oracle from collecting maintenance fees on those contracts where the government continues to use Oracle hardware and software. Even so, losing such a lucrative contract is bound to cause ripples among customers.

I have long held the view that Oracle is shaping up for a fall as it continues to both squeeze and alienate its customers through predatory pricing and sales tactics. While the loss of $388 million will hardly be noticed in a business turning over north of $37 billion, the repercussions may be felt more widely. Not that Oracle will worry any time soon.

In March, it was reported that Oracle has effectively pulled a Schedule 70 in the UK, persuading UK government that it would make savings through centralised purchasing, bulk buying, a single discount (read government only price list) and shared services.

However, the UK's National Audit Office has been skeptical of these big deals. The Register recently reported that:

The NAO published a report highlighting that a £47m upgrade investment was required from the government to cover the costs of updating Oracle's ERP [enterprise resource planning] systems before November 2013 at three shared service centres.

At present, the Cabinet Office spends around £1.5bn a year on finance, procurement, HR and payroll systems.

The NAO noted in its report that Maude's department would be required to cough up around £50m of transition costs and between £26m and £77m on redeployment, offset by one-off savings of £32m by shunning the Oracle upgrade costs.

One has to wonder the extent to which UK government is watching what's going on in the US and asking itself whether it really has done the best deal it can for citizens. In the US, at least for time being, the answer seems an unequivocal 'no.'

Elsewhere, in a private briefing earlier this week, Rimini Street said that it continues to win large deals for Oracle customers looking to slash their maintenance costs. This follows a blow out Q1 and bullish forecast for the year. Rimini Street now claims a sales backlog of $450 million.

Topic: Oracle

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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22 comments
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  • This is the right time to start moving to SQL Azure.

    Oracle and WMWare are both way overpriced. Time to stop being their brainless puppets.
    Johnny Vegas
    • yeah right

      like a substitute BMW with Hyundai.
      Do U really want to use those buggy microsoft products? Give me a break.
      Oracle software performance is one of the best in the world. Do you know why people still choose BMW and Mercedes Benz over crappy other luxury cars? Quality!
      epahgi@...
      • Performance best..

        Not as much as you think for most people. To be honest as a Admin Oracle is quite the pig. It will though scale to size that SQL server won't, not because of the App really.. More due to scarcity(or familiarity) with hardware that gets that big.

        But even a Enterprise license for SQL Server is not cheap. I was just pricing SQL Server Enterprise(pre-2012 which is moving to per core licensing). It was 25K per CPU.. Not cheap at all! But still far cheaper the Oracle.
        Johnpford
    • On the road again

      Astute readers will notice that, unlike the Microsoft salesmen, the Oracle salesmen are out calling on accounts. Not posting on ZDNet.
      Robert Hahn
    • Only for Less Reliability

      Low reliability with high TCO is the Microsoft way.

      I hope our government is smarter than that...
      itguy10
      • Government lacks the resource so it has to be cheap

        Government also has to standardize.

        Anyone that can convince government (federal, state, local, etc) that stopping spending for all of those Microsoft subscription fees and do their own thing is cheaper... more power to them...
        HypnoToad72
      • Oracle is WAY too complex

        I work for the Federal government and Oracle's RDBMS solution isn't significantly better than Microsoft SQL Server 2008 R2, but it is way more expensive and complex. Note, I am willing to try IBM DB2 if I ever get the chance.
        DonRupertBitByte
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      nimakend
  • well deserved

    for attacking FOSS & android!
    The Linux Geek
  • agree

    "I have long held the view that Oracle is shaping up for a fall as it continues to both squeeze and alienate its customers through predatory pricing and sales tactics."

    Agree, especially since open source solutions are largely unaffected by predatory pricing (how can you realistically engage in predatory pricing against something that is essentially free?), so Oracle is really only hurting themselves.
    CobraA1
    • let the genocide cleanse the interweb

      wow so glad "you" agree. What? did you forget your plus one stamp?
      rogerxy
  • All the money went to the clowns so there is nothing left for IT...

    :)
    Scrabbler
  • oracle cannot blackmail

    oracle hasn't been gathering dirt on the personal lives of feds through any of its "free" services
    rogerxy
  • PR stunt

    Yeah, right. Hundreds of mission-critical systems will grind to a screeching halt so that GSA can squeeze another 2% out of Larry Ellison's hide. Meanwhile, on ZDNet, the Microsoft salesmen will suggest spending two years and $50 million to convert everything to SQL Server, and the Linux geek will tell us they can save money by spending two years and $50 million to convert to PostGreSQL. Back at the ranch, the individual agencies will go around GSA and negotiate sole-source deals with Oracle to keep the wheels turning.

    It's all a big kabuki to make GSA look like something other than "those guys who throw lavish parties." Feh.
    Robert Hahn
    • Alternatives

      The problem is that the public does not understand in big sized applications (i.e. finance, insurance, health, government) there is no suitable alternative to Oracle database at least (other oracle products may have alternatives though).

      Features needed for big agencies (like RAC, Hot backup, specific types of transactions, handling of huge size tables and queries) are either not available in say MS-SQL, Postgres etc. or not robust enough that you can rely on them. Managing an Oracle database infrastructure is very expensive and needs highly professional staff but that's almost the only option when it comes to serious and sensitive applications.

      I had an application with 2 million users on MySQL and keeping the cluster up and safe was a nightmare.
      wmac1
      • DB2, Sybase ASE

        Both offer RAC equivalents and hot backup.

        There are alternatives to Oracle.
        jorwell
      • Did not say no other has the features

        @jorwell I did not say no other product has them. We do not have even 1 person in our organization who can support Sybase and DB2. None of them is popular in my country and as such we cannot find staff for that and that makes the database a risk factor.
        wmac1
      • You sure?

        SAP is even looking at moving away from Oracle......
        rhonin
      • The support question is not an issue

        "We do not have even 1 person in our organization who can support Sybase and DB2".

        Any competent DBA can make the switch. The whole point of RDBMSs is that fundamental model for all of them is identical.
        jorwell
    • quite right

      about the political posturing and side deals that will be made to transition. I used to work for GSA and I can tell you it is one of the most inefficient structures on earth. God help us if this is the best our gubmint can do. No wonder we are in such a mess.
      droidfromsd