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Beware a post-recession Oracle

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Following the disruption of a pandemic lockdown and the resulting global recession, most organizations are currently doing whatever is necessary to protect themselves. This includes delaying/scrapping projects, eliminating unnecessary spending, and essentially saving critical budget wherever possible.

The impacts of the economic downturn can be felt everywhere. Suppliers connected to a badly affected sector get a hit; every link in the chain shakes.

In times like these, it’s important to look at the big players – in the ERP market, that’s Oracle and SAP – and take particular interest in any changes they make in response to the recession, and more importantly, how this may affect their customers.

How will Oracle react to the recession?

Even Oracle isn’t entirely recession-proof. Like any other organization, Oracle’s link in the chain is shaking too. A global economic slump not only affects Oracle directly, but it also affects its customers. While the mega-vendor has the resources and people in place to potentially weather this storm, some of its customers may not.

In order to protect these organizations, then, how will Oracle proceed? One option could be to follow the example of many other providers and offer customers discounts or payment breaks. It is, after all, in Oracle’s best interests to support its customer base.

However, Oracle has already earned its reputation for coercive sales practices, dubious promises, and taking on more rather than securing what they already have. Like a great many organizations, Oracle is facing a challenging future. Just looking back over the past few months, it seems too likely that the vendor’s tactics will only worsen when considering how Oracle was behaving before the recession.

What are Oracle's creative selling tactics?

Through speaking to both our customers and market leaders, we have heard individual stories of Oracle’s “creative selling.” ITAM Review, independent and unbiased reviewers of the software licensing market, have gone one step further and contacted a number of its readers to share their experiences of Oracle.  These are the themes that emerged.

1. Received an audit fine? Buy a Cloud product

In one example, Oracle audited and threatened an organization with a fine of over €150,000. Oracle offered to waive the penalty if €50,000 of Oracle Cloud licenses were purchased instead.

Several ITAM Review readers attested to a similar experience.

A saving of €100,000 is never an unwelcome prospect, but this method cannot reasonably be called a sale. Oracle undoubtedly recorded it as a sale and put another name in the ‘Cloud Customers’ column, regardless of whether a Cloud product was in any way valuable to that organization.

And, unsurprisingly, it wasn’t. The organization in question admitted that it never used its force-purchased Oracle Cloud, as it “wasn’t technically effective.”

The same can be said for other organizations included in the survey; their audit fees were waived or discounted, in return for a valueless Cloud purchase.

This is Oracle swapping something you don’t want…for something you don’t want.

2. Want an on-premise price reduction? Buy a Cloud product

In the same survey, ITAM found that Oracle offers customers a significant discount on additional on-premise licenses, as long as they purchase a short-term Oracle Cloud subscription.

Tricky one. It’s easy to judge Oracle for its slyness; but equally, it’s hard not to be a little bit impressed by its optimism. An organization approaching Oracle for discounts on its on-premise software, by nature, probably isn’t thinking about a Cloud purchase. The overwhelming response to ITAM once again suggests that the organizations snared by this tactic did not need the Cloud.

It’s the equivalent of helping someone save money on their energy bills by selling them a loft conversion.

3. Want to stay supported? Buy a Cloud product

Waiving audit fines and adding Cloud subscriptions to negotiations are both reasonably new tactics for Oracle. But the mega-vendor has another, more passive method for moving customers towards a Cloud purchase, and has used it for years.

Oracle releases a new product version such as Oracle Database 19C (soon to become 20C). To stay on Oracle’s top tier of support - the Premier Support level - organizations must upgrade to the latest version. Otherwise, they face an increased support fee for a dwindling level of service.

This is how Oracle (quietly) coerces its customers into upgrading. In order to receive the full support service – security patching, legislative updates and BAU issue fixes, for example – the organization’s software products need to be in Premier Support. In order to have that, it must upgrade.

And there we have Oracle’s third tactic for moving customers to the Cloud. With Oracle steaming ahead into a Cloud-first future, and after considering its current sales tactics, it’s not too ridiculous to suggest that the options available will soon be either the Cloud or increased fees for less support.

Oracle isn't going to stop now

It’s incredibly likely that Oracle’s tactics will continue. When considering Oracle’s support revenue, it’s almost certain. Software support and maintenance generates a $20 billion annual income for Oracle, with a 90 percent profit margin.  This is not something that the mega-vendor is going to give up in a hurry.

It wouldn’t come as a massive surprise if Oracle announced plans to raise its support costs, in response to the current economic climate. And considering their past behaviors, that ITAM have deemed “Oracle Cloud fraud,” will the recession encourage Oracle towards even more dubious methods?

Knowing Oracle’s current methods means that you know what to watch out for. But if the global recession does inspire Oracle to up its ruthless sales game, there will need to be organizations ready to challenge them.

A support revolution is rising

There are ways to combat these three Oracle tactics, and one is much easier to escape than the others. You can’t stop Oracle from raising an audit, but there are ways to stay compliant and protect your organization from fines. And though you might be able to get out of a forced Cloud purchase as part of a discount agreement, it would take some serious negotiating.

Then, there’s the matter of Oracle using support costs to “encourage” customers to purchase newer products. Here, organizations do have an alternative option: third-party support. With this, you can escape Oracle’s support model of annual price increases and end-of-support deadlines.

Third-party support effectively replaces the vendor’s support and can provide the same (or arguably better) level of service for a significantly reduced price. The reasoning here is simple.

If Oracle has multiple products, and several hundred versions within those products, it is easier (and cheaper) for Oracle to support just the latest software. Third-party support, however, can provide services for all products and versions, and offer a much lower price tag.

Most organizations stand to save at least 50 percent on their previous vendor bill by moving to third-party support.

Verified by Gartner

Organizations have been eager to reap the benefits of third-party support, whether that’s to lower costs, avoid upgrades, or escape from Oracle’s price rises.

The demand for an alternative to Oracle’s support has risen so much, Gartner has already predicted that “the third-party software support market will grow from $351 million in 2019 to $1.05 billion by 2023 — a 200 percent increase.”

"Uptake of independent third-party support is increasing year over year. The software vendors’ Cloud-first fixation means that, for certain on-premise products, third-party support may be the only alternative. As on-premise clients face a decreasing number of options, uptake of independent third-party support is expected to increase substantially." - Rob Wilkes, Gartner.

Third-party support is a way for organizations to extend the lifespans of their Oracle products indefinitely. It’s a way to receive services that are no longer being offered by Oracle, such as custom-code support, and global tax, regulatory and security services. While Oracle may like to think that an upgrade is “the only way” to stay in support, this is simply no longer true.

"You start a business because you see a need in the market, and you fill that need – that’s why I started Support Revolution. Organizations have been fed up with Oracle for too long, and until recently, they have been expected to put up with it. We are proud to offer an alternative service that actively benefits these organizations, knowing that we’re making a positive change." - Mark Smith, CEO of Support Revolution.

If Oracle wants you to move, then move - away from Oracle

Oracle isn’t going to change its methods any time soon – in light of recent events, it’s only going to make its strategies even more outrageous. This is why it’s an ideal time for organizations to consider a switch to third-party support as a way of saving funds and sweating existing assets.

With third-party support, you join a growing market and make the same strategic decision made by countless organizations already – from those in the travel industry, manufacturing, and even key organizations in government. It’s a way of taking back control of your roadmap.

And finally, you get to savor the irony that Oracle’s methods of forcing customers towards the Cloud are actually pushing them away.

Mark Smith, founder, Support Revolution

Mark Smith
Mark founded Support Revolution in 2012 and is the driving force behind the company’s high growth and European success. Mark has a long history with Oracle & SAP product suites and core Oracle Technology products, having previously founded ERP consultancy PDG Consulting in 1998 which he still manages. Mark regularly speaks at technical conferences and has authored a number of technical papers and industry reports.