Everyone is talking about Cloud at the moment, especially major ERP providers Oracle and SAP, who are doing everything they can to win the Cloud war.
This is important because both Oracle and SAP are putting their customers on a deadline to upgrade to their Cloud products and repeating the same mantra to their customers of ‘move now or lose your competitive edge’, citing their increasing Cloud sales figures across many industries.
But are their claims of Cloud market domination just hot air?
Oracle are being sued by their own investors over their Cloud claims
Oracle is in an ongoing lawsuit with its own investors (a major pension fund) over claims that Oracle have artificially inflated their Cloud revenues through a combination of aggressive sales practices and artificial Cloud deals. The investors believe that Oracle inflated their Cloud revenues and growth rate, hoping to demonstrate customer demand and their place in the Cloud race.
Oracle quickly hit back that there was nothing wrong with its sales practices and that its practices do not mislead its investors, something that is still being argued in the courts.
Reviewing the legal case so far confirms some of the sales tactics we’ve seen ourselves, as the plaintiffs have gathered accounts from nine former Oracle executives who have outlined some of the main tactics Oracle uses to force its customers into Cloud contracts:
Tactic 1: The ABC strategy
ABC stands for Audit, Bargain, and Close – and should sound familiar to any Oracle customer!
The plaintiffs claim that Oracle have set up many of their on-premise software packages to automatically install products in a way that is likely to lead to customers violating their agreements, as well as making licencing as confusing as possible for many of its customers.
Oracle then triggers a licence audit of these customers and threatens large penalties for any violations that it finds – unless of course, that customer purchases a short-term Cloud subscription…
In their legal response, the plaintiffs describe the ABC strategy as:
“Oracle coerced its customers into bogus ‘purchases’ of short-term Cloud subscriptions… In truth, these were not Cloud sales: these customers were purchasing relief from draconian audit penalties related to Oracle’s on-premises software, or discounts on the on-premises software itself.”Source: Court drama: Did Oracle bully its customers into the cloud?
Tactic 2: Attached deals
Attached deals (or ‘financially engineered deals’ as they are supposedly called by Oracle) are where Oracle offers its customers discounts for on-premise software and other products if they also signed up for a short-term Cloud subscription.
These ‘attached deals’ may seem harmless, but the plaintiffs argue that this is the main cause of Oracle’s misleading figures, citing a VP of North American Cloud Sales who reported that 90-95% of the sales his team made were driven by this type of sale, and that 90-95% of those deals had no real use cases!
This brings into question just how ready and mainstream Oracle’s Cloud software really is, and whether it really is the obvious choice that they make it out to be.
Tactic 3: Stopping support (or massively increasing the price)
Finally, Oracle steadily raises the cost of supporting their older products until they completely stop support altogether. This not only increases pressure to upgrade over time, but gives a clear cut off point where customers have to decide to either go unsupported or upgrade to Oracle’s latest version (which is now Cloud).
To make matters worse, in our experience when on this extended support, many of Oracle’s responses to breakages are ‘upgrade to the latest version to fix this’. We’ve worked with many customers where this response has been the norm, and they have been pleasantly surprised when we quickly fix these issues during their transition to our service.
What can you do?
- Check your licencing: Do an audit of your Oracle systems and their licencing. Being prepared for an audit and understanding your risk areas will mean you are less likely to be strong-armed by Oracle’s tactics.
- Investigate third-party support: You do not need to upgrade to Oracle’s latest versions. Many of the ‘benefits’ of Oracle’s latest versions provide very little actual value to many of its customers, and support can be provided by a third-party at a fraction of the cost.