Oracle’s fiscal year ends in May and since most contracts are closed in that month, the majority of renewals expire in that same month as well.
Yours probably too. Which is why this is perfect moment to talk about support savings.
Addressing your OPEX spend on Oracle support can be quite challenging.
But this should be no surprise: Oracle’s annual support revenue stream is Oracle’s biggest and most profitable money maker. And so, Oracle will protect this revenue stream more than anything else.
Most companies trying to argue their own case, fail in effectively reducing their annual spend. And that is because they don’t bring the right elements to the negotiation table, nor do they understand what they can achieve themselves…sometimes without even having to contact Oracle. You need to understand the inner working of the Oracle support organization within the rest of the Oracle company.
But it is equally important to consider actual and future product requirements of your company: It would be extremely counterproductive to cancel support for quantities or products that your company needs now or in the near future.
10 YEAR’S OF OWNERSHIP
Let me explain just one of the many mechanics that influence the actual cost, the price point and the inability to reduce the annual spend at first glance.
Let’s say that back in 2010 you purchased 10 Processor licenses of several Database related products;
At list prices, the license cost was 577.600 Euro’s, and another 22% for the annual support fees.
This is just an example, but the same applies to everybody – also if you do business with Oracle in other regions or in other currencies.
It’s worth mentioning that the annual support fees are based on the NET fee the client negotiates, so that’s after applying a discount percentage.
Here you can see the annual cost, and how they evolve over time assuming an annual increase of 3%
Client A received no discount, Client B received 25% discount and client C got 50% discount. For each client, the annual support increases year over year.
Over time, as illustrated in red, it may happen that a company’s annual support spend increases well beyond the original price list level.
This is also a phenomenon we will investigate during our projects.
But, most of all this illustrates the importance of support revenue to Oracle and your budget. Year in and year out.
FAILING TO REDUCE ANNUAL SUPPORT SPEND
Let’s take a look at a typical scenario for the client who got 50% discount.
This could very well apply to your situation. You renewed Oracle’s support agreement over the last 10 years. And, today you pay 85,000 Euro per year for product updates and technical assistance.
But, you are now no longer using Real Application Clusters (RAC).
Since this product represents about 28% of the entire support costs, you expect to save around 25,000 Euro per year by simply removing support for this product.
When trying to implement this saving, you will find that Oracle refers you to page 6 of the support agreement, stating that if a product is removed from support then the remaining licenses will be priced at Oracle’s list prices at the time of support termination.
Meaning; when you change the volume, Oracle changes the applicable discount to the remaining licenses. In accordance with the calculations on their website the new support fee would not end up 25,000 Euro cheaper, but 10,000 Euro more expensive!
As a result, Oracle will cancel support for RAC, but continue to charge the original figure of 85,000 Euro support per year for the remaining 3 products. Of course you will be genuinely offended, but Oracle will not change it’s positions.
OTHER COST INFLUENCERS
When looking at the annual support spend, the actual invoice is just one joyful thing to work with. For us, it’s also an excellent opportunity to include other factors that determine the cost.
We often find that IT infrastructures have not been setup with the cost of licenses- and support in mind. With that we mean;
- Which products are installed where;
- How many resources are available to them;
- How have licenses been assigned.
Very often, changing one of these elements can get you in an even better position to reduce your support costs for Oracle programs.
Many companies have set their annual support to auto-renewal. As a result, many miss the opportunity to even think twice about the support fees. It would be extremely valuable to take the time to understand the license position at the time of contract renewal. Of course that is something we could help you with.
Lastly, it’s important to understand which product you actually need. Many times, clients have been sold and have installed the most expensive product version, or even a bundled Suite product. These can be real game changers. And, for many Oracle products – including Business Intelligence, Oracle Applications and Oracle Database – many clients could easily downgrade to a less expensive version.
For example, only the minority of all Database deployments truly require an Enterprise Edition version. Many could switch to Standard versions, often reducing the license and support costs by over 80%.
It should be clear that Oracle’s support agreements and contract renewal team is not there to help you to reduce your annual spend. In fact, the sole purpose is that you renew each contract, nothing else.
In 9 out of 10 cases, Oracle will tell you that support reductions are not possible – or only in a very limited way – but definitely not to the extend they should be possible in your mind.
In arguing Oracle’s case, most clients will be pointed to any or all of the following sections of the agreement:
- License Set
- Matching Service Levels
- Re-instatement of Oracle Technical Support
- Pricing Following Reduction of Licenses or Support Level
NO CURE NO PAY!
So when Oracle says it is not possible to reduce annual support, and when you start to believe that this is true….Contact us.
After a brief assessment, we can often help to reduce the annual spend.
Of course, we put our money where our mouth is. Therefore, we will not charge you for this service, unless and until we have actually achieved a cost reduction for your company.