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Understand the Tipping Point of Oracle Support Repricing

Thought-Leadership by Brian Lowinger
on September 13, 2016

understand-the-tipping-point-of-oracle-support-repricing

While Oracle’s business is built on great products, their success is equally due to their innovative support policies. These policies are often disadvantageous for customers because they can eliminate flexibility and the potential to reduce support spend in the future. Although Oracle’s strategy around support is comprised of a number of policies and terms, perhaps the most powerful, and the most difficult for customers to grasp, is the support repricing policy.

The Support Repricing Policy Defined

When customers buy Oracle software on a single order, those licenses are given a Customer Support Identifier (CSI). The CSI is akin to a social security number that is forever associated with the licenses.  Another separate license order would be assigned its own distinct CSI, and so on. For a given CSI, Oracle’s repricing policy dictates that when some, but not all, licenses are de-supported, the support for the remaining licenses is repriced at list price (as long as this doesn’t exceed what the customer was previously paying). In short, this policy makes it difficult for customers to save money when their Oracle requirements decrease, and safeguards Oracle’s support revenue without regard to the practical value customers are receiving.

An Example of Support Repricing

Let’s use a simple example to illustrate how Oracle’s repricing policy can impact customers

Suppose a customer purchased the following Processor licenses, a $1.4M list license bill of materials, on a single order at a well-negotiated 75% discount:

Product Quantity
Oracle Database Enterprise Edition 20 Processors
Tuning Pack 20 Processors
Diagnostics Pack 20 Processors
Partitioning 20 Processors

In such a case, the customer would end up with a yearly support payment of around $79K (ignoring any inflationary adjustment rate for the time being). At a 75% discount, that $79K in support is a pretty good deal as long as the customer receives value from the software. The tables turn, however, if the customer decides they no longer need all of their Oracle licenses. Suppose our customer chooses to de-support the same number of licenses for each of the four products listed above. The chart below illustrates how many licenses this customer would have to de-support in order to ultimately lower their annual support costs for this CSI. Because Oracle would re-price the licenses that remain on support so that the support stream is not lower than what the customer is currently spending, our hypothetical customer would not have an opportunity to reduce their support spend until they had de-supported 64 of their original 80 licenses! By quantity, that is 80% of their licenses. Once the customer has whittled away nearly all of their entitlement, they now have few enough licenses remaining on support so that support priced at list cost is less than what they originally negotiated. In other words, the customer would need to make some drastic, and likely impractical, reductions in their Oracle use in order to realize savings.

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As we can see, Oracle’s confusing support policies safeguard revenue streams for Oracle while limiting the opportunity for customers to be more strategic in their IT investments.

Although it can be difficult for customers to reduce the amount of money they spend on Oracle support, the good news is that for many customers opportunities for savings do exist. At SoftwareONE, we regularly evaluate the potential for our customers to reduce their spend with Oracle and other software vendors. To learn more about how you can save money on Oracle, click on the banner below to speak with a SoftwareONE expert.

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Topics: Database and Datacenter

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