Why is Oracle so keen on ULAs if they are such great value to clients?
In Part One, we looked at why Oracle needs to protect is support and maintenance fees and how ULA’s are being positioned by its sales team.
Here we examine why ULA’s, despite their high apparent discounts, are so attractive to Oracle.
There are several reasons:
- In uncertain times with increasing competition, Oracle is deeply attracted to getting money up front. It’s a great cashflow bonus to secure orders up front, even at high discounts, for what may or may not happen in future years.
- Hence it incentivises its sales force to sell them. The fact that the sales organisation may then have a barren few years worries no-one. As the sales team is stretched to cover greater territories and all the new Oracle acquired products, they will be busy anyway.
- It is pretty efficient for Oracle to manage. As multiple legacy agreements are migrated into a single agreement the cost of maintaining renewals, account management cost and cost of license compliance audit activity are all reduced.
- The huge benefit to Oracle is that of earnings predictability. Ever wondered how Oracle can be so consistent and meeting or beating analyst earnings estimates? It comes largely from support and maintenance earnings and their inherent predictability. What a ULA does is minimise potential seepage from all the legacy agreements that will be migrated into the ULA, then it increases the spend and contractually binds it into place for 3-4 years. Even better it dramatically reduces the chance of end of term attrition of support fees.
Not necessarily so. When “probabilities” and complexity are involved, Oracle has rarely been content with simple success. As Larry Ellison once said “Success is not enough, you need to see others fail”.
The next post will look at why so many clients fall into new and sexy ULA agreements and why so many fail to get the benefits they expected and find themselves trapped in licensing mechanisms and support commitments that do not meet their needs.