This article was written by AJ Witt of The ITAM Review in conjunction with Oracle & SAP third-party support provider Support Revolution
Global IT spending is due to decrease, with a potential 7.3% decline before the end of 2020, with further declines expected in 2021. But while organisations continue to try and recover from the pandemic, already facing losses across the board, CIOs are still expected to shift their spending towards digital developments.
“COVID-19 is forcing all organisations to get creative and stay afloat without exclusively offering physical experiences. Specifically, CIOs with less immediate cash on hand should plan on becoming more digital than they had originally anticipated at the start of 2020”
John-David Lovelock, Research Vice President at Gartner
We echo this view. With lockdown and social distancing measures in place, and some organisations forced to close physical locations, providing digital over physical experiences is no longer just a competitive edge – it’s a necessity. Organisations must modernise in order to remain relevant and competitive.
However, now we have entered a global recession, organisations will be in an even worse financial position from which to work towards a digitally focused brand.
If going digital is a crucial investment for organisations but IT spending is on a decline, how are organisations meant to fund their digital developments in the first place?
A recent market guide from Gartner has revealed that every Oracle and SAP customer should be investigating third-party support as a way of making crucial savings. Third party support seeks to reduce the cost of annual support and maintenance on software from large vendors – typically IBM, Oracle, and SAP. At enterprise scale the savings are typically substantial and often greater than seeking to cut spending in other ways. Despite this, having closely observed the market, most organisations seem to be following at least one of these three distinct methods of reducing IT spending:
In times of financial difficulty, it is always best practice to approach your external suppliers in order to secure the best possible deal or explore the market for alternative options. Delaying projects harms the business – there was clearly a business need for that project otherwise it wouldn’t have been greenlit. Downsizing assets or switching vendors often isn’t viable due to the disruption caused, costs involved, and productivity hit of adjusting to new ways of working. This is particularly the case for ERP systems.
That leaves you with negotiating with existing vendors. Negotiating with or changing some of your smaller vendors is usually a simple process, but mega-vendors that provide your ERP software – the very foundations of your organisation – cannot be swapped so easily. While you may feel confident to negotiate with the smaller vendors, you’ve probably given up on initiating a conversation with the bigger ones.
After all, when you’re doing what you can to survive, why pick a fight with a giant?
Oracle is one particular ‘Goliath’ of a vendor that you may be avoiding. Upon hearing the words ‘negotiate with Oracle’ the next word you think might be ‘impossible.’ It’s understandable, given the mega-vendor’s reputation.
Rest assured; it is not impossible. In fact, it’s recommended.
Short answer: Yes.
You may feel as though you have no leverage over Oracle, whereas the vendor has all the power in terms of wealth, people, and influence. But as unlikely as it sounds, there are ways to negotiate with them.
You do need to prepare, because if you are going to pick a fight with a giant, you need to come battle-ready. Use the right services to your advantage, supplementing your own work as ITAM teams with others such as independent license consultancies, and consult the experts.
Forrester’s Mark Bartrick has been involved in the software industry for more than 25 years, and in that time, he has helped many businesses negotiate software contracts with a great many providers, including Oracle.
Based on a discussion with Mark, these are three important tips for negotiating with Oracle.
Before you even approach Oracle, you need to perform a self-audit of your Oracle estate and ensure that your organisation is correctly licensed. It’s best practice to do this regularly anyway – you never know when the giant may come knocking – but definitely put aside the time to complete one before beginning negotiations.
A self-audit will help you better understand what you’re using and why, which will help in defining your negotiation strategy. It may also identify noncompliant elements in your Oracle estate, giving you adequate time to patch holes in your armour before battle (purchase the necessary licences and reinstate your compliance) rather than trying to do so when Oracle is on its way.
You need to be ready for Oracle to fight back, because like any other vendor, Oracle has sale and revenue targets to hit. Once you’ve opened the negotiations, you’re on the radar and face an increased risk of an audit. But, if you’ve already conducted your own audit, generated an accurate ELP, and resolved any compliance issues, you’re better defended and have a better chance of holding your position.
Negotiating 101: you need a negotiation strategy.
In the simplest terms, you need to understand what it is you want from Oracle. What is your desired outcome and why? Keep it simple, easy to understand and remember. Have an end goal in mind. That way, there’s less chance of crucial elements being missed, and Oracle exploiting elements you’re unsure about.
But it’s not enough just to know your own stake in this fight. In addition to your battle plan, you need to have an idea of your opponent’s. What does Oracle want from you and what will they do to get it?
To give you a head start, we can tell you that an upgrade and/or Cloud-based purchase will almost certainly be Oracle’s focus. Cloud provides Oracle and other vendors with repeatable, predictable income – an income category that has transformed the financial performance of vendors such as Adobe & Microsoft and is thus popular with shareholders.
Another vital part of their battle strategy will be to force you into a corner. Oracle’s sales representatives are notorious for taking their time in getting back to you using stalling techniques. By slowing the flow of information to you, it narrows the time available before your next renewal date or project deadline. That way, when you’re inevitably backed up against the wall and short on time, you’ll be forced to accept something on their terms, not yours.
Solution? Give them deadlines. Name a specific date by which point they need to respond, just as they would do if they were auditing you. Play them at their own game. And if that alone doesn’t have the desired effect, you get out the big guns.
Speaking honestly, a direct attack against Oracle isn’t in your favour. Many organisations don’t have the leverage to make demands or even make Oracle so much as wince. Your best move against Oracle is having an alternative but doesn’t mean threatening to leave for a different ERP provider. That’s a long-term strategy that Oracle won’t worry about.
If you can’t bring down the giant directly, you can shake the ground it’s standing on by targeting its support revenue. We, along with Gartner, Forrester and most Oracle License consultancies agree on investigating third-party support as a viable option, not just due to potential savings, but also because it can drastically help with negotiations.
Oracle loses its leverage because you’re essentially approaching them as a new customer. You’re in the best possible position to outline what you want. They recognise the threat of third-party support and the dangers it posts to their support revenues which has for years been the cash cow of their ERP offerings.
If you’d like to start negotiating with Oracle and take back control from your vendor, Mark Bartrick has even more tips and tactics to use to your advantage and really strengthen your negotiating. The more you prepare, the better.
You can join the discussion in this free-to-access webinar: