Seven signs it is Oracle’s year end

Seven signs it is Oracle’s year end

How to handle sales pressure and licensing 'negotiations' to make sure it plays to your advantage when Oracle come a-knocking.

Published on 17th May 2024

You might be able to tell what time of year it is by the blossom on the trees or bluebells in the woods. But for Oracle customers stuck in an office somewhere, there is another way of knowing that it’s May without consulting a calendar.

A frenzy of Oracle sales calls, account managers getting in touch with a deep concern about licensing arrangements, and offers of discounts that will definitely disappear at the end of the month. That’s right, it’s Big Red’s year end.

Oracle’s financial year ends on May 31. For customers, it might be an opportunity to get discounts on the software they intend to buy, but equally Oracle will try to pressure customers by going around the main point of contact or raising the possibility of a software audit – if not directly threatening one.

Here, The Register speaks to four licensing experts to see what customers might expect from Oracle as it approaches the end of its financial year, how they might guard against its tactics, and find ways to work the situation to their advantage.

Craig Guarente, founder and CEO of Palisade Compliance, an Oracle licensing advisory company, spent the first 16 years of his career working for Oracle to help it negotiate deals from the other side of the fence. The financial year end has always been a “crazy” time at Oracle, he says.

“It’s their Super Bowl, it’s their World Cup. It’s all hands on deck, with everybody working all the time. We could totally see if Oracle was on track to make its numbers or not because when the fire sale started, we knew we needed a bit more business in the quarter. I think that the mentality is still there. I don’t see your sales team having any less motivation than I did 20 years ago.”

Oracle is likely to have daily targets they report toward their fiscal year end so they can report the numbers in the current fiscal year. It is also the time of year when most big Oracle contracts come to an end and need to be renegotiated. For example, most Unlimited License Agreements (ULAs) – which experts warn do not offer the best prices to most Oracle users – tend to end at the same time as the financial year. Oracle might pressure customers to re-sign or negotiate hard on replacing it with perpetual licenses. Meanwhile, account managers can get a new roster of clients in the new financial year so they want to make sure their current deals are signed before the year’s end so they – and not their replacement – get the commission.

Oracle is entitled to charge for its intellectual property, and while heavy sales tactics can be frustrating, there’s nothing illegal in its approach.

For nearly all customers, getting off Oracle in the short term is not an option, even if it is desirable. Whatever the reason, Oracle will push hard to get deals done before the end of the month, using both the carrot and the stick. Here are seven techniques it might use and what users can do about them.

1. Oracle REALLY wants to talk to you

May is Oracle’s busiest time of year as the tech vendor tries to close deals with customers and ensure they are booked during the current financial year, which ends on May 31.

While it is Oracle’s numbers on the line, Big Red tries to make this part of its customers’ concerns, says Palisade Compliance’s Guarente.

“You can expect a lot of phone calls, a lot of meeting requests and text messages. I just asked one client if she heard from Oracle lately and she just laughed, she said they were calling every day.”

For an Oracle user in transformation, with many Oracle product ranges in its estate, it can be difficult to keep track, he says.

“They’re talking hardware, software, cloud, Java support, consulting, this particular company is in a transformation. They are moving to the cloud or upgrading the hardware. So there are a lot of moving parts.”

Scott Jensen, Oracle advisory practice lead at software purchasing and advisory firm SoftwareOne, says: “May can be our busiest month of the year as well because so many Oracle agreements are transacted in the month. There’s definitely an increased push and pressure from sales representatives, especially those who have not met their quotas by this point in the year. There’s certainly going to be a higher volume of emails phone calls, and escalations to managers within your organization.”

2. Big discounts are on the table

The first and most obvious technique Oracle will use to get deals signed by the year end is the discount, but users should beware that just because the numbers look tempting in percentage terms, they might not end up maximizing value for money in the long run.

Nick Walter, CTO and professional consulting services head at advisory firm House of Brick, says: “If you do know that you need to purchase licenses and so you’ve done your due diligence and analysis and you know exactly what you need, then right now is about the best time to make a purchase than any other time of the year. It may be perpetual licenses, it may be Oracle Cloud, it may be a Java subscription, whatever it is. Because Oracle is trying to make year-end numbers, they will make extra concessions that they normally wouldn’t make at other times of the year.”

Discounts this year have been less aggressive than they have been in the past, he adds. Whereas 50 percent discounts had previously been available on perpetual license purchases, this year discounts between 35 and 40 percent are more likely.

SoftwareOne’s Jensen says Oracle would also try to make sure that deals are made as early in the month as possible to make sure they don’t get stuck in the pipes.

“They might say this offer is valid for the next seven days only. If you don’t execute by the 20th, then you will lose your discount, or the discount will be reduced to a smaller number. They don’t want to wait if they can at all avoid it because they run the risk of the transaction getting caught up in red tape within their client organization.”

Nonetheless, customers can always push for greater discounts if they feel confident in their position, he says. “It doesn’t hurt to ask, especially as the deadline gets closer and closer.”

But another tactic customers can expect Oracle to use is the suggestion that a deal above a certain size and discount will have to go through two tiers of senior management. They will use the idea to tell the customer this must be the last request for discounts, Jensen says.

“There is some truth to that, but again, on Oracle’s side, at this time of year, all of the leadership is well tuned in deals that are likely to close. While it’s true that approvals have to be made, the length of time that it takes to make those approvals, I think, is actually reduced at this time of year because there’s just so much visibility and so much pressure to get things closed.”

3. But this deal won't be here after May

It’s not just the size of the discounts Oracle will use to get customers to sign new deals, it’s also the idea that time is running out.

Customers are often told that the discount will not be available in June or later in the year, but that’s not always true.

Jensen says being tempted by discounts in the short term could be a false economy for customers.

“I would advise any customer not to transact in Q4 for the sake of getting a discount unless you’re absolutely certain that those are the licenses you need and it’s the correct volume of licenses that you need. When that’s the case, then Q4 could be a fantastic time to transact and get those discounts, but outside of that, you run a much greater risk of over-purchasing or buying licenses you don’t need and they just sit on the shelf. Effectively, you cancel out any discount you got.”

Palisade’s Guarente says Oracle sales reps are also motivated to get the deal done by the end of the year, not just to make their numbers look good and get bonuses, but also because they may move to another account and another rep could end up with the deal.

“Oracle sales reps want to get the deal now because they might not have the account later,” he says.

It is a situation customers could play to their advantage. An approach might be to say to an Oracle rep, “You’re not coming down in price enough after you’ve moved from our account, we’ll speak to the new sales rep next month who would be happy to take a quick deal, in Oracle’s Q1 with a bigger discount,” Guarente says.

“That’s a great way to turn it around. One way to do it is to take their problem and really refocus it. You don’t have to sign in May.”

Eric Guyer, founding partner at Oracle and SAP advisory and consulting firm Remend, says: “Our view of Q4 dealmaking is that most customers either own enough software already, or are overpaying for what they do own, and likely both. This makes May 31 a costly distraction for many in an active sales cycle with Oracle that shouldn’t be.

“We appreciate Oracle’s ‘wild west’ approach to pricing insomuch as Oracle honors shrewd negotiation tactics. Oracle is up to its typical year-end dealmaking here in 2024.”

However, users should be aware of longstanding operational expenses that Oracle’s policies lock customers into paying, often for decades, he says.

“Anyone considering an incremental license or subscription purchase should press pause and analyze what they are already spending. Customers get duped into reducing long-term flexibility by what seems like a great deal in the short term. May is a great time to buy software, but so is every other month of the year if you’re wisely controlling your vendor relationship.”

4. Suddenly you've been bypassed and your boss is getting calls

Whoever is the main point of contact for Oracle in an organization should be well versed in how to hold firm against the vendor’s various tactics to earn more revenue and margin from each customer. But when Big Red is pushing for its end-of-year numbers, its account managers are inclined to navigate around any blockage.

SoftwareOne’s Jensen says if Oracle is not getting the answers it wants from the main point of contact in tech or procurement, it will escalate the “problem” if they have the contact information for the organizational leadership.

“Make sure your leadership is aware [of how to respond to Oracle]. Is it a well-informed organization, which is keeping Oracle at arm’s length? Then hopefully your superiors are already well aware and maybe even expecting this kind of approach from Oracle. But if it’s an organization that’s not used to transacting with Oracle, then that may come as a little bit more of a surprise. I don’t know if it yields great or significant results for them per se, but it’s definitely a tactic that they’ll use.”

House of Brick’s Walter agrees he’s found Oracle had no respect for its customers’ organizational structure or roles when it was pushing for a sale.

“Oracle’s aggressive sales tactics are very much on display at the highest pressure time of year for the Oracle sales representatives and their aggressive tactics can manifest in a variety of ways. We’ve definitely seen Oracle sales representatives attempt to go over the heads of people they’re negotiating with and go directly to executives at a client account and suggest that they’re in great danger or potential audit liability if they don’t sign a deal quickly.”

5. Did you know audits are possible? See also: The audit that is not an audit

As Walter says, sales tactics can be accompanied by veiled references to the prospect of an audit – which some customers find intimidating – if a sale is not progressing the way Oracle would like.

Oracle has the right to charge for its intellectual property, according to its contracts, and it can also check customers are in compliance with those contracts. But customers can feel such uncertainty about the process that they might not get the best deal for them.

Palisade’s Guarente says the end of the year could see Oracle more likely to mention audits, particularly when people are trying to exit agreements such as ULAs, which let customers “certify” their way out of buying perpetual licenses.

“A lot of people are talking about ULAs. Companies are very worried about exiting these things because they think they’re going to be audited. Oracle will audit you to get money. It is something that has to be taken into account. But if you are in compliance with your Oracle contracts, who cares if you get audited? In that respect, it’s an empty threat.”

However, companies that were not sure of their licensing position could be vulnerable to Oracle’s sales tactics. “Being unsure: This is a really powerful tool that Oracle uses. Fear, uncertainty, and doubt really drive a lot of procurement decisions. People think, ‘I buy this because I don’t know what’ll happen if I don’t buy it’.”

House of Brick CEO Nathan Biggs reckons the threat of a formal audit had receded this year, but it was still a tactic Oracle could use.

“In past years, the threat of a formal audit was always a lever to try to get the customer to do something to move toward a purchase. This year, for some reason, the formal audit has been less of a threat, and the formal audit activity has probably decreased a little bit with our customers.”

However, Oracle is getting more subtle in its approach to the relationships between audits, compliance, and sales, he says. “What they’re doing this year is using the audit team – the License Management Services people – and promising customers it’s not an audit, but instead it’s just a process to make sure that they are in compliance. Customers sometimes think that that’s a better deal. But in many cases it’s not. They have more protections with their license agreement if they are under a formal audit than if they are simply under an informal LMS review that doesn’t have the same backing of the license agreement.”

However they are framed, informal audits mean customers should take care about the information they share with Oracle as they risk weakening their negotiating position further down the line.

“We’ve seen examples with customers where the Oracle salesperson will approach anybody throughout the organization,” Biggs says. “It might be an executive, it might even be a DBA or system administrator, and they’ll say that they believe that they’re out of compliance with some aspect of the licensing and Oracle needs information quickly.”

But if the management or legal team had been dealing with Oracle, they would never have shared such a level of information, he adds.

“The customer is in a position where they have to recover from this information that was sent. In many cases, Oracle is taking this information out of context. They’re not giving it the full analysis that we would expect in a formal audit, but rather they’re using pieces of the information they receive to try and paint the customer in a position of non-compliance with them although a deeper analysis would find they are not out of compliance at all.”

6. Do you have any Java?

In January last year, Oracle changed its licensing terms for Java, the popular language and development environment. Under the new regime, users have to license the software per employee, rather than per user or per processor. At the same time, licensing experts warned it could mean price increases for users. The Register has reported unsolicited Oracle emails inviting customers to talk about their Java deployments, while Gartner estimated most organizations would find the new regime two to five times more expensive than the old one.

As Oracle approaches its year end, interest in Java is ramping up once more. Palisade’s Guarente has been dealing with a client who was paying around $20,000 a year for Java, and because of its number of employees, it had an offer from Oracle to license the same software for £30 million ($38 million). He says companies certifying out of ULAs are finding any information about Java is being handed straight to Oracle’s Java licensing team.

“It’s really important to get ahead of this. But the good news is these are one and two-year term agreements. Even if you do everything wrong, even if you make all the mistakes, you can write a short-term check to Oracle. Unlike Oracle database, you can fix the problem later.”

One of the approaches is to migrate away from Oracle Java since the language itself is open source, although Oracle’s runtime and development environments are proprietary. This means there are open source alternatives to run and develop Java software, Guarente says.

SoftwareOne’s Jensen thinks Java is the most frequently mentioned product right now in all of the conversations with his company’s clients. “We’re taking at least one new Java client every two weeks. The big change in their license model has certainly shaken the industry. Customers are doing everything they can to either avoid making a purchase or to stay under their existing licensing terms.”

House of Brick’s Walter adds that Java is now the biggest source of aggression from Oracle in terms of licensing. “Java is expanding the customer base for Oracle because even if the customer is not using Oracle database, there is a chance that they’re using Java either on user desktops or laptops or in server environments. Oracle is aggressively knocking on the doors of people and claiming non-compliance with Java.”

Walter says House of Brick has also dealt with clients who were paying tens of thousands of dollars and were now being asked to pay millions of dollars under the new Java regime. “It’s catching customers off guard because they don’t really know what’s in the Java agreement. They don’t know how to count Java so Oracle is being very aggressive in pushing them into a purchase for a subscription.”

7. We might be able to make that audit go away

As well as raising the idea of an audit to customers looking at negotiating license agreements, Oracle offers new agreements as an option for companies already dealing with the audit process.

The hope that a new agreement might make the audit go away is the carrot to tempt users into signing, but they should be wary until they understand more about their position.

SoftwareOne’s Jensen says if Oracle’s auditors or the LMS team are already talking to an organization, the sales team might offer to “help out.”

“Maybe the audits are not even really over yet, but you’re in a position where you’re probably going to have to buy licenses anyway, then you could certainly see a sales rep come along and say, you know, if we can transact something by the end of the month, then the audit will be put to rest. You definitely will see auditors and sales reps working hand in hand. But typically will be if LMS is already involved.”

A typical offer from sales might be to promise not to charge for prior history by backdating the deal or to offer discounts on the licenses the customer might need. “You can still get discounts even when you’re being audited, that’s not unusual either,” he says.

Conclusion

Oracle generates around $52 billion in revenue, and its vast application user base and ownership of Java make it one of the most influential companies in enterprise technology.

Although it’s an intense period for Oracle, its year end is its business, no matter how clients under pressure to sign deals might feel.

Organizations that have done their homework and are confident about the Oracle licenses they need could use the time of year to strike good deals and get some discounts. But Oracle users still figuring out their position or buying strategy should not feel pressured into buying licenses they may not end up needing. There will always be another year.

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