The votes are counted, and Oracle yet again wins for being perhaps the most tyrannical of all technology suppliers. The standard Oracle Terms and Conditions are legendary for being one-sided. What’s worse, Oracle has gained an equally reviled reputation for leveraging those terms and conditions to their full and unilateral benefit at the great expense of their customers.
If you are renewing your annual maintenance with Oracle, buying new Oracle software, engaged in or concerned about an Oracle audit, considering Cloud solutions or having them forced upon you, or just thinking about how to mitigate cost and risk and improve the realization of value and benefit in your Oracle agreement, this series and final report will be the quintessential guide you need to sharpen your contracting and negotiating skills. This will enable you to harvest massive amounts of value from the bargaining table. In this 12-part series, NET(net)will countdown the most egregious terms and conditions that cost our clients millions, and how you can renegotiate these items to provide your organization with improved value and better contractual flexibility.
Number 12: Future Price Holds
We encourage all clients to seek future price protections from Oracle in the form of Price Holds, assuming they are at, or close to, the market optimized and/or original anchor deal discount levels.
- What is a Price Hold? It’s a provision in your contractual agreement with Oracle that protects your future purchases so that you will be able to make them at a previously agreed upon discount rate.
- Why is it needed? Many of the originating anchor transactions with Oracle are sizable and often competitive, and therefore generally offer larger than normal discounts. However, if clients don’t negotiate price holds for future purchases, Oracle will often take an extremely transactional view of the commercial nature of the ongoing relationship and will generally base discounts on the size of the future transaction itself, NOT the aggregate value of the purchases since the inception of the relationship. Therefore, inconceivably, discounts usually worsen over time, not get better, as most believe they should.
Clients that get a large original discount but do not negotiate a future price hold are often extremely surprised by the value grab that occurs after the first deal, when they need to buy new products or services, but no longer have the competitive environment of a selection, rather are adding capacity to a chosen infrastructural component. We routinely see massive erosion of value after the initial Oracle deal, as client options may be limited by their prior purchase and/or timebound by their need to address production considerations.
We encourage clients to demand additional consideration in exchange for more software acquired over the price hold term in the form of improved discounts for future purchases. Of course, Oracle doesn’t generally appreciate this way of thinking and is highly resistant to provide this kind of a consideration. Generally, future price holds can be negotiated, and are generally granted by Oracle for not more than 3 years, and almost always aren’t quite as good as the originating transaction discount percentage. Clients should always seek a price hold from Oracle for as long as possible and for as close to the original discount level as possible (if not better).
Price holds are especially useful for small incremental purchases, but Oracle often tries to set transaction size limits, which nullify their obligation to provide price holds on single transactions if they are smaller than (say) $400,000 per transaction – citing all kinds of invalid reasons why, but try not to agree to a future transaction size limitation, because going from a good discount to a terrible (or no) discount for a small transaction can be extremely punitive as you are likely to have already budgeted for the expenditure thinking that you’ll get the same discounts. If the price hold discount isn’t very good because your originating anchor transaction wasn’t exceptionally large and/or your negotiation results weren’t excellent -- or if it turns out that a secondary transaction is quite sizable, a poor price hold can actually act as double-edged sword as it can bring down the discount that Oracle will offer, so be sure to also set up the price holds as a minimum discount to apply (not a maximum).
Pro Tip: Be sure that price holds extend to any resulting audit actions. As you probably know, Oracle is widely known as one of the most aggressive and confrontational technology suppliers on earth when it comes to auditing their customers, making enormous (and often times wildly exaggerated) claims about non-compliance and fee implications, and then strong-arming clients into making bad purchasing decisions in an attempt to make the audit problems “go away”.
Of course, the best way to ensure you get price holds that will future proof your Oracle deployments (and to learn about the rest of the 12 most egregious Oracle terms and conditions without waiting), is to contact NET(net) for a review of your specific situation and your Oracle estate. We’ve been optimizing and negotiating Oracle deals and renewals all over the world since 2002 and are generally able to help clients reduce risk & cost and improve the realization of value and benefit.
About NET(net)
Celebrating 17 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002.
NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at info@netnetweb.com, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.
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