I ran procurement organizations many years ago, and still have a number of friends among former colleagues. One spotted my role as Palisade’s operations head, and called me up to complain about our favorite subject, Oracle. The quote above is how she started our call, and it is used with permission.
She is absolutely correct. In a normal vendor relationship, your company decides how much to buy, when, what to do with it, when to stop using it, and when to change vendors. You also have all the leverage because you are spending money, and can therefore compel the vendor to your terms. In an Oracle relationship, everything IS backwards.
You do not get to decide how much to buy. Your IT people have an idea of what they want to do, but their Oracle sales rep (or reseller) puts together a quote that has very little connection to what they originally thought they needed. Considering that Oracle certifies your IT people, those people tend to trust what Oracle tells them they need. By the time that sales rep adds on pre-requisite products, options, features, et cetera – you are not in control of what you are buying.
You do not get to decide when to buy. Oracle is widely known for its absolute refusal to bend on price and terms, except during quarter-end. This manufactured buying crisis places all of the time advantage on Oracle’s side. Their sales reps will quote a quarter-end price, but it takes weeks before you see the contract to which that price is attached. When you raise a concern about language, deal structure, or even typos on the document that add thousands to the price, you will be told (and your IT people will echo), “It is too late! Sign it! Or we lose the BIG DISCOUNTS!” This is the case regardless of your budget or financial year – you are not in control of when you buy.
You do not get to decide what to do with the software on which you just spent millions of dollars. This is very carefully controlled by the software license agreement. Spin off a company, combine legacy license agreements, open a joint venture, start a new division, outsource manufacturing, lay off people? Any of these can be license events that require you to spend more money with Oracle, even when you are using less software. This is not unique to Oracle, but because of the complexity of their software and opacity of their terms – you are not in control of what you can do with the software.
You do not get to decide when to stop using the software. Many CIO’s we have talked to are determined to get out of their Oracle software and use alternative products. Occasionally they followed dubious advice from ‘license consultants’ to save millions on Oracle support, and as a result they now risk being out of compliance. The fact is that when you got those HUGE end of quarter discounts, you bought a bundle of software. You can try to later turn off your support of that product, but it results in the special deal you got on the bundle being re-opened and re-priced. As a result, virtually all companies who try this (legally) end up saving nothing and are at risk of spending more. A higher price for turning off support on software you no longer need – you are not in control of when you stop using it.
You do not get to decide to stop doing future business with Oracle. Frustrated by all of the above, your CIO decides to never do business with Oracle again. The marching orders go out through IT, “Buy the alternative product.” Your company does not like the way Oracle does business, and cannot get out of old contracts economically, so your business will go elsewhere. You buy from smaller companies, more flexible in their terms. That works, until you now owe Oracle millions for using a non-approved third party solution for virtualization or other infrastructure solutions. Or Oracle buys that small software company, and uses their leverage to convert your old contracts to new Oracle paper. Oracle bought 92 companies since 2005, and their stated goal is to be the leader in every segment by internal development or acquisition. They buy up the companies necessary for your industry to operate – you are not in control of when you get to change vendors.
Everything is backwards, and it is all because of leverage. Part of this is because of unconscious choices in the IT business, blindly trusting the vendor who certifies your people, or buying into the fact that an unwieldy bureaucracy only becomes reasonable 3-4 times a year. Part of this is based on conscious decisions to buy from Oracle over years, resulting in hundreds of millions in sunk costs for licenses, hardware, training and support that gives the company that sold you that technology a huge inertia advantage.
Finding ways to gain leverage for our clients is key to what we do at Palisade. We avoid our competitors approach, saving 40% this year by putting their clients out of compliance. That saves money today, but gives Oracle enormous leverage when they audit you. Remember that Palisade’s founder used to run this for Oracle. Believe us when we say that it is not IF they catch you, but WHEN.
As we wrapped up our conversation, I asked my friend what we could do to help her company. She said, “Oh, we have standard terms and conditions you must sign without change. We cut your fees by 50% before we agree to talk with you, we then take your proposal, write it as an RFP and put it out to bid.” At my aghast silence, she chuckled and said, “I bet it is hard to feel sorry for us about our relationship problems with Oracle!”