Oracle Sued Over Alleged License and Sales Practices Used to Sell Cloud

Oracle is known for its hard-charging sales teams and for its aggressive LMS audit practices by a team that is famous for using unwritten “rules” and policies as a way to compel their customers to pay Oracle millions of dollars in license fees and cloud fees.

Whether its City of Denver, Mars, Specsavers, or the thousands of other business that have fallen victim to these practices, Oracle’s reputation is well deserved.

The Oracle vernacular for this method of using audits to compel customers to buy cloud services the customer does not want to buy is “Audit, Bargain, Close” – or “ABC” deals. We call it ABC, too – for “Audit, Bargain, Cloud”.

1000 new Oracle sellers in EMEA region

In Europe, the Middle East and Africa in 2017, for example, we saw an increase in requests for support helping customers faced with the Oracle ABC audit. Customers were receiving audit requests from Oracle, sometimes with Oracle pushing customers for a response within 5-10 days, despite the clients’ contractual obligations to provide assistance in an audit within 45 days. These pressure audits are there to generate revenue for Oracle’s cloud business, plain and simple. Here’s a closer look at the Oracle ABC audit.

A (Audit): Oracle will perform an audit, looking everywhere for compliance challenges. In most cases they are able to show areas of non-compliance, partly because clients do not fully understand the information they need to provide Oracle in response to an audit, and partly because there can be many interpretations to Oracle’s contracts and accompanying policy documents that Oracle will always view in their favor.

B (Bargain): Once Oracle has an idea of the compliance challenge a customer may be faced with, they will present the customer with a large bill to bring their estate into compliance, with the addition of back support fees, etc. 

We have even experienced clients that were so fearful of Oracle LMS audit practices, they signed new deals before the audit process was complete.

This fear of a large bill puts pressure on the client to look at cost avoidance strategies, and this is where C comes in.

C (Cloud): It’s here we see Oracle deliver a miraculous saving if the customer signs a new cloud deal compared to the on-premise option. (It’s not so much a saving as a deal signed to avoid the cost of the audit findings.) We’ve seen customers that have signed a 1-year cloud deal to buy some time to sort their deployments out before the auditors come back again. The frustrating thing here is the Oracle sales rep is not selling the value of Oracle products, or looking to help the customer innovate, or solve a business problem with the products Oracle has available, but is helping them with cost avoidance created through an audit. In some cases, customers have no intention of using the cloud solutions.

This trend with ABC audits looked set to continue, with the Register for example reported that an additional 1000 Oracle cloud sellers across Europe, the Middle East and Africa had been on-boarded for 2018, to fish for opportunities using the ABC method. 

Despite Oracle’s insistence that their cloud sells itself, and Oracle does not have to engage in such activities, we continue to see their sales teams engage in these activities, even in the middle of a global pandemic.

Oracle lawsuits inevitable

Pushing the envelope like Oracle does, it’s only a matter of time before customers fight back. Mars sued Oracle over an audit gone bad. Palisade Compliance had a front row seat during that brouhaha as we directly worked with Mars through that entire process. Now comes word of another lawsuit. This one is slightly different, but, if the allegations are true, it is more evidence of Oracle using their licensing and contracting as a way to sell more cloud services, even when a customer does not want those cloud services.

An unpleasant adventure

In early 2018, A&E Adventures filed a class action suit against Oracle in the Florida Circuit court. The issues stemmed from Oracle’s acquisition of Micros. Micros is a point of sale solution many companies use to take payments from customers. It’s basically the cash register hardware and software. Needless to say, that’s pretty important for a company like A&E that owns multiple store locations. No cash register, no cash, no business. A&E alleged that once Oracle bought Micros, everything went downhill. There were problems with the systems that Oracle was unable to fix. Here is the important part.

According to A&E, not only was Oracle unable to fix the system, Oracle actively worked against the customer’s efforts to get the systems online and upgraded.

Firstly, Oracle allegedly took away the client’s “Red Keys”. The Red Keys contain the software code that Micros customers can use to upgrade their systems. These are keys that A&E said they paid for. Copies of contracts were attached to the end of the complaint. According to the complaint, “Oracle, however, has advised Plaintiffs that – despite the express licenses granted by the Micros Sales Contracts … it is Oracle’s position that Plaintiffs lack valid licenses.” Oracle just refused to recognize that the customer was licensed, and, there was nothing in the complaint saying that Oracle tried to sell them more licenses.

Secondly, according to A&E, they attempted to bring in a third party consultant to repair the Micros systems. That third party wanted Oracle to confirm that A&E was licensed, but Oracle refused to provide that confirmation. The result was that the third party would not do the repairs. You can see clearly, in A&E’s view, that Oracle is using their position of holding the licensing information to stifle A&Es efforts to get back up and running.

Why would Oracle put so much pressure on a good client, who paid their bills, and just wanted to use the Micros solution they had always used? That answer is also in the complaint. According to A&E, “Oracle has purposefully and knowingly engaged in a deliberate and purposeful scheme to force owners of RES 3700 [Micros] to abandon that system and upgrade (at a substantial cost) to Oracle’s subscription-based Simphony Point-of-Sale system.” To connect the dots back to cloud, Oracle describes Simphony as “the premiere cloud and mobile hospitality management platform”.

Only one side of the story

A complaint like this is only one side of the story. Oracle hasn’t responded, testimony hasn’t been given and there is really nothing on the record other than A&E’s version of what happened. I’m sure Oracle will have a different view on what’s happened. Having said that, if these allegations are true, it’s very clear evidence once again of Oracle using licensing and contracts as a hammer over customer’s heads to sell cloud services. It makes you wonder how much of Oracle’s cloud revenue is generated by these activities? No one knows. In fact, I don’t think Oracle knows. The activities described by A&E were not that of an official audit. In fact, these were probably sales and support people just doing what they were told to do.

Oracle staff put amazing pressure on their customers to buy Oracle cloud. This pressure includes audits, compliance, upgrade pressure, and more. We can only hope A&E’s lawsuit actually goes to trial with a verdict. That will surely shed more light on Oracle’s behavior and maybe even on their cloud ambitions.

Whether it’s the City of Denver, Mars, or A&E Adventures, it is clear there is a pattern of behavior by Oracle to combine aggressive sales tactics and over the top LMS audit practices to force their customers to buy more Oracle licenses and cloud. All this makes you wonder, if the Oracle products are so good, why do so many customers have to be “forced” to buy them? It’s critical that everyone using Oracle understand how that vendor works, so you can stay in control of them and not be put into this box. 

Find out more about how we can help you defend against a db or software license audit from Oracle.

Picture of Craig Guarente
Craig Guarente
Craig is the President and Founder of Palisade Compliance, which he founded in 2011. Before 2011, Craig worked at Oracle for 16 years where he was the Global Vice President of Contracts, Business Practices, and Migrations. He was also the Global Process Owner for Oracle’s audit teams (LMS), a member of Oracle’s CIO advisory board, and on the Oracle User Group’s contract and licensing advisory board. Craig is now the leading expert on Oracle licensing, is quoted in dozens of publications, and assists with many high-profile Oracle disputes.