It’s a complicated time to be an Oracle customer. As the vendor pressures enterprises to move to its cloud offerings, many are still navigating complex purchases and renewals for on–premise solutions. Non-compliance is a real threat as customers struggle to keep up with changing licensing programs and product use rights. The result is an Oracle sourcing environment where overspending, overbuying and suboptimal terms are commonplace—and it’s only getting riskier.
Many Oracle loyalists are finding themselves in a tough position. The vendor may be overwhelmingly focused on cloud adoption, but Oracle’s cloud evolution has been rocky. The vendor has been a laggard in the race to the cloud, especially within its core ERP and database product categories.
Meanwhile, on–premise licensing revenues continue to decline year-over-year. Growth in cloud revenues has yet to neutralize this threat and some indicators suggest Oracle still has a long way to go before it can claim success. In certain markets, the renewal rates for cloud services are less than 50 percent.
These dynamics are changing the way Oracle does business with enterprise customers. Oracle is focused first and foremost on getting customers on board with its cloud vision, and customers are feeling this pressure. Those that aren’t ready to move to the cloud are also feeling the heat as Oracle sales teams are under orders to increase the revenue and margin of every on–premise purchase and renewal. The vendor is also using licensing audits as a tactic to recoup lost on-premise revenues and “motivate” non–compliant customers to increase their spend or move to the cloud (often in exchange for lower penalty fees).
5 TACTICS TO REDUCE ORACLE SPEND
NPI predicts that the Oracle sourcing environment will get riskier as the vendor pushes forward on its cloud–first journey. Companies that want to mitigate these risks and eliminate overspending need to take a 360–degree approach to optimizing their Oracle estate, including legacy on–premise investments and cloud purchases as well as software asset management processes.
Here are five Oracle optimization tactics that can yield big savings for Oracle customers:
Another way to reduce Oracle license counts is to use hardware that runs fewer, but more powerful, processor cores. Oracle publishes a Processor Core Factor Table that determines the number of licenses required for specific server models. The higher the core factor, the more licenses are required.
Underutilized licenses are a little less conspicuous. These licenses may be in use, but aren’t being used optimally. For example, companies often buy a professional or premium user license when they could get buy with a limited user license. Companies need visibility into what’s actually being deployed across their Oracle estate. Ideally, this is achieved with a combination of Oracle’s monitoring tools (to determine what is being used), third-party monitoring tools (to determine areas of underutilization), and a deep understanding of Oracle’s evolving licensing programs (to handle remediation and negotiation). While Oracle has historically taken a punitive approach to customers that try to drop support on portions of their Oracle footprint, the vendor is showing more flexibility these days – especially for customers who are willing to invest in their cloud offerings, which leads us to our next point...
LEVERAGING ORACLE’S VULNERABILITIES IN A TIME OF CHANGE
Oracle’s customers will feel the growing pains of the vendor’s cloud transformation for years to come. Yet it’s important to remember that the Oracle sourcing environment has always been a complicated one. On one hand, the vendor has historically demonstrated consistent and fair pricing (especially when compared to other enterprise IT providers). But the complexity of its licensing programs has always promoted overbuying, underutilization and difficult software asset management.
Oracle’s cloud journey has magnified these challenges, while underscoring the vendor’s vulnerabilities as it executes on two parallel (and often conflicting) revenue strategies. Customers that have the licensing, pricing and negotiation intel to navigate this sourcing environment have an opportunity to reduce costs across all facets of their Oracle estate.