Whether you are the CFO, CPO or CIO I know from talking to many of you that you acknowledge Oracle software is solid, even great but you all complain that it is too expensive.Now I am not here to defend Oracle and talk about the value that the Oracle software brings to your business but I do hear at times perhaps a little too much focus on getting a great discount. Sure of course you want to get the highest discount possible to maximise the return on your investment, I just think that much energy can be spent to drive a hard bargain. If you want to get a great deal with Oracle, try combining some of these tactics as the total may outweigh just the licence discount you are striving for.
The cost of Oracle software and hardware is not just the initial CAPEX investment but the ongoing Support and maintenance costs. The standard Product Updates and Support fee is 22% of the purchase and for hardware it is 12%. The annual spend for Oracle can be significant, and this is a key area to look to optimise. Although you will be unlikely to negotiate a reduction in the support percentage,( unless spending > $10m where you should be able to get down to 20% on software), there is another way. Often forgotten about when you sign your contracts, Oracle increment your support each year by an ‘inflationary’ 5% or so. Looking at your initial spend over three years and building in the support and the ‘inflation’ increments you will get a truer figure of the oracle cost. Now negotiating a reduction in the increments or indeed freezing support increments to zero for a period is something that can be approved. Clearly the larger your purchase, the more opportunity to negotiate a freeze for more than one year. This can have a significant impact on your TCO so worth exploring.
Trying to get high discounts for smaller purchases can be more challenging. Oracle will often push back and quote the public e-Biz discount schedule for the volume discounts. That’s fine but here is a tip that can be very useful. For this to work you need to have a clearly defined project, use case or application that needs the software to be purchased. So if a new customer claims application needs a number of software licenses; database processors, security and options, to run it then by ring fencing this application you can often get a higher discount than otherwise for the same size purchase. Let me explain, if you know the application has say 3-5 years life in it then the licenses required are unlikely to be recycled or used in the short term so it is probably safe to request that the licenses are application specific, meaning the licenses can only be used for the application in question. The key is to try and make this as broad as possible while still able to demonstrate the licenses are running the named application. A ‘claims’ application could, in theory, go through a number of iterations or versions and still use the application-specific licenses. Now most customers can usually define a set of applications, so why not negotiate a number discounts for ring-fenced applications and perhaps buy some licenses under the lower discounts but without the application restriction.
I know you don’t believe in paying for non-production licenses, I hear it all the time but this is the Oracle way. It is also one of Oracle’s biggest gotchas for non-compliance. Countless customers running VMWare to manage the test, dev and pre-production environments for developers. Sound familiar? You need to license the physical server not the virtual CPU count for the Database, or if audited you may find yourself having to pay Oracle much money with very poor discounts. So take this tip, ring fence your licenses that you need in processor terms for the whole area and negotiate a much higher discount than the production requirement. As before these licenses are not transferable. You can only use them in non-production environments, but you can save a small fortune doing this.
Another tip that can be easily negotiated. For development environments, this can be a useful saving. Often in Dev environments, customers will purchase Named User Plus (NUPS) licenses rather than processors to reduce the costs. Let’s say you only have a small number of developers or admins accessing the Dev servers. The user minimum license rule dictates that the minimum number of NUPS to be purchased is the larger of (total cores x core factor) x 25 or number of users. So by requesting the standard user minimum figure for database of 25 down to say 10 then the total required Named Users can be significantly reduced.
Negotiating with Oracle and for them to get approvals and legal changes takes much time and may require several iterations. Leaving to the end of a Quarter and springing a ‘deal’ on the Sales Rep is not a good idea. Far better to flush out the opportunity early and work through all options available to maximise the deal. Giving time to work through the options and construct the contracts with best discounts and terms will mean that Oracle reps will be forecasting the deal for a given period based on your feedback or their best guess. When Sales Reps forecast deals, they are expected to close in the time frame defined. Having your deal lined up and then delaying to the last possible period may potentially give additional leverage especially if you ‘threaten’ to delay as you need more time or need to validate demand. Most reps will have a few points in reserve for final negotiations.
Getting decent discounts on Oracle hardware is not going to happen. Anything above 25% is a miracle for Hardware but buying Oracle systems with software may help get higher discounts than you have in the past. Although the two lines of business have separate approval lines, Oracle is keen to drive sales of systems, especially Engineered systems. So these are my top 6 tactics for getting a great deal with Oracle. What do you think? I would love to hear from you. Please share any experiences or tips you also have. Please comment below.
If you need help or need to discuss any of these points in detail and how it may be relevant to you, please contact me in the usual way via our contact form.