Oracle is now in its fourth quarter, meaning the vendor and its customers are locked in the annual ritual of trying to get new deals done before the fiscal year ends on May 31.
The company has long been known as one of the industry's toughest negotiators, and that hasn't changed a bit this year, according to some observers. But there are a number of strategies customers can employ to ensure the best possible deal, according to some users, consultants and analysts.
One way is to think big. Oracle's sales representatives have a short term focus, "so they will prefer to get one big order now than get several smaller orders over the next three years, even if the latter would add up to more money in total," said Forrester Research analyst Duncan Jones in a report released this week. Therefore, salespeople may be more generous with discounts and other concessions if the customer agrees to a larger purchase, he said.
The question to weigh is whether such a move makes financial sense in the longer term, since annual maintenance fees may kick in on some products before a customer is actually prepared to start using them, Jones added. "Oracle's discounting policy can lure you into buying excess products and capacity and then you are doomed to pay maintenance on this shelfware forever," he wrote.
Shelfware, unused software, remains a pervasive problem in the IT industry, according to a new survey commissioned by 1E, maker of AppClarity, an application that looks for "software waste" in an organisation's IT environment. More than 80 percent of roughly 500 respondents to the study in the US and UK said they had shelfware.
Maintenance fees over time add up to far more than the initial cost of licences, which are commonly discounted substantially off list price. Vendors prize maintenance fees, since they provide steady revenue even when new licence sales are hard to find. This makes it difficult for customers to get vendors like Oracle to budge.
The only time Oracle customers have real leverage over maintenance fees is during a new licence negotiation, when Oracle might agree to keep those costs flat for a couple of years in exchange for a large purchase, Jones said. Oracle might also agree to adjust maintenance fees customers are paying on shelfware in exchange for them buying something else, he wrote.
Swamped with deals
In the current environment, some deals may be easier to get than others, though.
Oracle is being less flexible on discounts for products they consider to be "best of breed," said Eliot Arlo Colon, president of Miro Consulting, a firm that advises clients on Oracle licence negotiations. Overall, sales representatives have been pushing hardest on Fusion Middleware, BI (business intelligence) and security products, he added.
In addition, customers are getting approached by more salespeople than in past years, he said. "If you're in a database deal or an application deal, the next thing you know you're getting a call from the middleware rep, the BI rep, trying to get in on the deal." Such crowding means agreements are taking longer to complete, Colon said.
The trend also ties into Oracle's strategy of selling customers on an end-to-end stack of technologies, from hardware to applications, which stems from its purchase of Sun Microsystems.
Oracle's sales activities have definitely been influenced by Mark Hurd, a former HP CEO who was named co-president of Oracle last year, according to Colon.
"Mark Hurd has been very hands-on on the transactional level. That's been a big difference. The word on the street is that Hurd is getting involved with old clients, getting his hands dirty on a lot of stuff." He is not interested in just the largest deals, either, Colon said. "It's been more on what he thinks is strategic to Oracle."
Hurd's influence has been positive, said John Matelski, chairman of the Independent Oracle Users Group's contract and product licensing committee. IOUG has "had good conversations with Mark," said Matelski, who is also executive vice president of IOUG. "They are engaging customers a little more, their global customer programs team has been making more efforts to do outreach into the community."
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