Oracle wants everyone in the cloud. Blindly following the cloud hype is not advisable
Oracle is doing well. The growth in cloud sales, which exceeds the on premises sales for the first time, is the main driver of this financial success. Blindly following this cloud hype is not always advisable though.
First, check whether your organization really needs new cloud software and check in what way it will improve business processes. Moving to the cloud may seem financially attractive now, but can become a lot more expensive in the end.
Only three years ago, relatively late, Oracle entered the cloud business. It was a radical switch, including re-encoding all software and a number of big acquisitions.
Since then, every sales conversation has been about cloud. Oracle account managers get huge bonuses when closing cloud deals, and have the freedom to offer big discounts. With existing customers, Oracle performs a well-known trick: creating commercial momentum through an audit. If the audit is financially negative for the customer, Oracle will most likely waive the claim if the customer switches to cloud software.
In September, Oracle announced a new “Bring your own license” program. This allows customers to use their existing Database, Middleware and Analytics licenses for the cloud option of it. With the new Universal Credits model, you can interchange different cloud services for a fixed amount – depending on what you need at a certain moment. Oracle leverages financial incentives in various ways, just to get new and existing customers move to the cloud. That does not mean the organizations cannot benefit from cloud – on the contrary. But for Oracle customers it is crucial to know about this method, as it directly affects their financial situation.
The risk is the temptation to go for an attractive cloud deal, without looking into whether it meets the organizational needs. One often looks only at what it’s in it for the short term and doesn’t take into account it can become more expensive in the long run. For example, the cloud product doesn’t necessarily have the same features as the on premises product, as it had a lot of customizations. Or because the price of the cloud contract, which usually does not have a long duration, rises sharply after two years. In addition, one can also get out of compliance with cloud contracts.
In order to prevent a blind entry into the cloud, it is important to have a detailed overview of all current Oracle products in the organization, including contractual arrangements and their (expected) use. Also, make sure that you chart the organization needs and carefully read Oracle’s cloud conditions. Such a good preparation provides three advantages:
You know whether you are at risk when confronted with an Oracle audit and you can eliminate compliance issues in time (and maybe even an entire audit). This way Oracle account managers cannot use this in their favor during negotiation.
You are also stronger in negotiations if you know exactly what you have and where the organization wants to go. You only purchase a cloud product if it helps your organization. In addition, this makes it easier to agree on certain clauses, for example that the price does not change when Oracle adjusts its terms.
You can develop an exit strategy. If the cloud situation ultimately does not bring the desired benefit, then it is helpful to have a financially attractive way out.
This article was published on 12-10-2017
Richard is one of the managing partners at B-lay. He started to work in the license management industry in 2004 and worked for almost 10 years at Oracle as regional director of compliance. He uses his knowledge of enterprise software vendors (such as Oracle, SAP, IBM and Microsoft) to educate, equip and enable software end users in their challenges regarding proper software license management. Richard holds a master’s degree in IT, from University of Amsterdam in the Netherlands.