Negotiating with Oracle: Knowing the Rules to Achieve an Optimal Outcome

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Oracle offers a huge basket of products to choose from, each of which comes with a vast array of rules that govern licensing. Oracle also offers several different options for customers to choose from when purchasing. Structuring a deal with Oracle that delivers an optimal outcome requires a thorough knowledge of its products and a clear understanding of your needs. How long do you want to commit to the product/support period? How are the licenses measured? How many of those licenses does your organization need now and over the term of the agreement? How does your organization want to license them?

Nothing disrupts a negotiation faster than Oracle raising a compliance issue and using it to walk back a concession. Before initiating negotiations with Oracle, you must know if there are any compliance issues with its products. This means developing an effective license position (ELP) for all your Oracle products. In addition to identifying compliance issues, the ELP process also helps identify products with excess licenses and products no longer in use.

Depending on how you’ve orchestrated the orders for these products, you may be able to eliminate maintenance costs for licenses you no longer need through a request for termination. But, at a minimum, you can use the knowledge you gain through your ELP as a lever in your negotiations by asking Oracle to help offset the lost value of those licenses by improving the value of the new proposal.

When an organization has an ELP that accurately conveys its current consumption of Oracle licenses and identifies gaps in its license entitlements, the next step is to forecast future demand of the products in scope. At a minimum, this needs to encompass a quarter-by-quarter 36-month forecast. This is necessary to ensure you are not purchasing shelfware on day one and assuming the burden of the associated maintenance costs until you plan to actually deploy the licenses.

Knowing what you need and when you need it allows you to train your focus on how you want to buy it – i.e., the Oracle contracting option that works best for your organization. Be prepared to answer these questions:

  • Do your requirements call for on-premises perpetual licenses or term licenses?
  • Do you need cloud-based subscription products?
  • Is this a tactical purchase for an immediate need?
  • Is this a strategic purchase with long-term objectives and potential growth?
  • Do you need to harmonize the environment on Oracle’s catalog while your strategic technology roadmap is still in flux?
  • Does the CIO have a purchase structure in place to allow teams to quickly action new purchases of Oracle products within a defined budget?

With these questions answered, your next objective is to develop an engagement strategy that incorporates your organization’s required value outcomes, including discount protection, financing and payment terms, etc. A good engagement strategy gives Oracle a framework within which to think creatively about how it can help you meet your goals. Ideally, the strategy will focus on your strategic relationship with Oracle, establish a win-win mindset and underpin your negotiation narrative.

The next step is to harmonize the communication plan regarding the negotiations to every key member of the technology and business team responsible for the products in scope. Make no mistake, Oracle will begin making inquiries wherever it can to gather intelligence to help in negotiations. Ensure those efforts are directed to a single point of contact who owns the negotiation process. Depending on the size of the deal, this could be your CTO, CIO, CFO or CEO. If Oracle hears the same message, regardless of the voice, it will have less influence on the timing and scope of the deal, leaving more control in the hands of the lead negotiator for your organization.

Now that you are positioned to drive an optimal outcome in your negotiations with Oracle, it is time to contact your rep and get started. ISG helps companies negotiate large and small software licensing negotiations and renewals. Contact us to find out how we can help you.

About the author

John Szente is a Principal Consultant with over 30 years of experience providing IT solutions consulting and management, vendor management and IT strategic sourcing across multiple categories including software, telecommunications (network, wireless and analog), hardware and managed/outsourced services. In his Principal Consultant role, John is responsible for helping ISG’s clients identify and capture near, mid and long-term cost optimization opportunities in their enterprise, ERP, desktop and subscription-based software and IT hardware spend.

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