Oracle Audits Will Get Worse in 2018

Over the years, Oracle audits have become the bane of existence for many of Oracle’s customers, thanks in large part to Oracle’s reputed predatory behavior, especially in its LMS (License Management Service) Group, and the well-earned notoriety for its truculent account management practices in its sales organization.  As we’ve often said, it’s not matter of if, but when you will get audited by Oracle.  As we are seeing unfold now, the pace of these audits continues to accelerate.  Below are some of the reasons we think there will be a continuation of aggressive audits for the foreseeable future. 

As with most software providers, the push to the cloud rages on and as that business transitions, so too will the need to audit customers.  Given the business model of cloud (operational pay-as-you-go and limited to your subscription thresholds), there really will not be the same level of need for traditional audits as we know them today.  In our view, the need for a large LMS Group (License Management Services) will no longer be necessary.  They may transition some LMS resources to become some version of Cloud Consultants, and have the remaining teams maintain their current role as Oracle’s version of the IRS.  What would a former LMS Agent turned Cloud Consultant really do?  Maximize usage (and consumption charges) to Oracle’s favor in every way possible is our guess.  That would be like managing a sports team and asking your biggest rival to help you coach the team.

Just a quick Google search will find you a plethora of articles related to Oracle and their audit malevolence.  For example: Oracle Dubbed the Big Bad Wolf of Software Audits.  As you may also remember, we named Oracle #4 in our Audit-Crazy Supplier Top 10 List.  Audits have been giving Oracle some bad PR with its customer base for some years now.  No one likes to be held hostage to sign a new agreement or buy some incremental software they may or may not ever need.  Cloud will now offer a way for Oracle to move away from the traditional audit, so they can focus more on extracting as much consumption from users as possible.  Driving up consumption revenue is a far more unobtrusive scheme to take advantage of customers and inflate profits versus confrontational audits, hence our prediction that LMS will reallocate resources (#1 above) to focus on it.  Think about it, same resources (former LMS), same goal (inflate profit), different tool (consumption vs. audit).

One of the oldest plays in the Oracle playbook, is to leverage the inflated (and often VERY wrong) audit findings to drive more incremental revenue in exchange for limiting or even eliminating the misleading or even outright phony audit action.  This can be revenue to increase the old on-premise stuff, but more recently, audits are being used as a hammer to drive more cloud revenue – whether you need it or not.  Oracle is more than happy it seems to accept a cloud purchase as a means to cover an on-premise compliance issue.  Important to note that while Oracle LMS may close out your audit with a corresponding cloud acquisition, the underlying cause of the original compliance issue may go unresolved, leaving you with less money and the same headache.  Oracle looks to bump its cloud numbers ever higher, what better way than to audit a customer, find some alleged compliance issues, and leverage the penalties to put the customer in some brand-new cloud offerings at a relatively lower cost.

If you oversee growth, how do you incent a massive sales force to sell your shiny new toys rather than the old models?  You design a compensation plan that drives the desired behavior.  So, if you want to sell more cloud, you simply pay salespeople more to sell that, and less to sell the on-premise software.  Given the audit tool has been so effective over the years to drive revenue, how do you think salespeople will behave when they know that tool is going away?  They will use that tool furiously until it can’t be used anymore to ‘leverage’ customers into higher commissioned cloud services.

As Martin Thompson from ITAM (IT Asset Management Magazine) said in a February 23^rd article:

“Oracle is looking around for revenue and for non-compliance by people not licensing their products properly. However, a modern audit is about pre-sales and a way of beginning a dialogue. If they find a shortfall they can then build a solution to resolve that shortfall," he said.”

"Lots of software publishers will use the big four [accounting firms] to do the audits on their behalf, but Oracle does them directly with a dedicated team called Oracle License Management Services (LMS), which is about 500-strong [and] is an indicator by itself."

Nothing has really said it better than this Business Insider headline, “I felt like we were being extorted”: Customer says Oracle tried to strong-arm him into a cloud sale.

And nothing has really changed.  In fact, in our opinion it will be worse in 2018 given the push to cloud, sales incentives, revenue models, and bad PR - all adds up to perhaps the worst Oracle audit season on record.

Take heart however, as you need not be a victim or wait for an audit notification to act.  We’ve been working with Oracle agreements and audits for 15 years and have the Federated Market Intelligence, and the information, expertise and experience you need to both mitigate and eliminate risk, plus the proven performance to help you minimize costs and risks, and maximize the realization of value and benefit in your Oracle estate.  Whether you are in reactive (panic) mode, or planning ahead, NET(net) can help you ensure your organization is ready.

Contact us here and we’ll arrange a call with one of our Subject Matter Experts who can immediately assess your situation.

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