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This was a genuine question asked by an Oracle Executive when the CEO announced its latest ploy – Oracle Support Rewards. In a surprising move, the mega-vendor has revealed plans to help CIOs save money with a seemingly generous discount scheme.
Oracle Support Rewards is the latest tactic in the vendor’s game plan, and has been designed to encourage and accelerate the migration of existing customers to Oracle Cloud Infrastructure (OCI).
We know the vendor has had its head in the Cloud recently, but why? What are the real driving forces behind this lofty and very un-Oracle move? And who is this scheme really rewarding?
Firstly, we thought we would cover what Oracle Support Rewards actually entails to see exactly what we’re dealing with.
Much like major retailers, airlines, and supermarkets, Oracle’s Support Rewards program will enable existing customers to receive credits when they invest in Oracle Cloud Infrastructure (OCI). These credits then enable customers to, essentially, redeem discounts on their Oracle Support bills.
According to Oracle, customers can expect to receive a 25 cent (18p) reduction (25% discount) in their support bills for every dollar spent on migrating workloads to OCI.
The rewards will be marginally higher for those who have found themselves entrapped by an Oracle ULA (you can read more about the vendor’s ULA traps here), with these customers set to receive a 33 cent (24p) reduction in their support bills for every dollar spent on OCI deployments.
Oracle claimed in a statement that “a ULA customer with an Oracle technology licence support bill of $500,000 could eliminate that bill entirely by migrating $1.5 million of workloads to OCI.”
So, to clarify, Oracle is willing to expunge an organisation’s ULA (on-premise product) support debt – worth $500,000 – if that organisation buys $1.5 million of licences for a Cloud product.
It’s not uncommon for Oracle to offer discounts on the initial purchase price of the product. Maybe you can even recall what discount you received on your Oracle estate.
But the vendor absorbs this first hit, knowing it will claw this revenue back in support fees – that’s the vendor’s bread and butter.
That’s why this uncharacteristic move (drastically cutting support costs) has us wondering if the mega-vendor has finally taken heed of the mounting customer frustration with Oracle Support’s rising prices and falling service levels.
Could it be that Oracle Support Rewards is a veiled attempt to appease customers’ anguish over exorbitant support costs? Or is this a ruse to distract from the vendor’s ulterior motives?
It might not be the most elaborate plan, but it could be highly effective, and the outcome could completely change the landscape of the Cloud computing world.
So, we’ve covered the basics of Oracle Support Rewards, and magnified some of the small print, but what we’re really wondering is: who stands to gain the most from this uncharacteristically generous move from the mega-vendor?
It’s no secret that the vendor has been called out on numerous occasions for its neglectful service and pricey support fees. Now, it would seem the vendor is actually using its own flaw to work in its favour.
With CIOs under pressure to bring forth innovations with limited or no budget (probably in part due to the vendor’s continually rising support fees), Oracle Support Rewards represents an opportunity for organisations to make savings and accelerate Cloud migration plans.
Such a move has been particularly favoured of late, with many organisations recognising the value of an agile and easily scalable system in the wake of the COVID-19 pandemic.
But, with the vendor offering such chunky savings on its support fees (even as a sales ploy), is it highlighting just how overpriced its support is?
The idea that the vendor is trying to help organisations make savings (after exploiting them for decades) with Oracle Support Rewards seems unlikely.
It’s far more probable that Oracle is feeling hot under the collar as a result of its recent Wall Street performance, which indicated that the vendor’s future success is dependent on far greater levels of Cloud adoption and usage.
The recent drop in Oracle’s share price has been linked to the less than satisfactory figures released by the vendor in relation to its (stalling) Cloud business. It’s no great surprise, then, that Oracle has devised a scheme (though the premise of the scheme was most definitely unforeseen) to try and recover lost ground and quickly.
The move to push its Cloud business is particularly poignant in the context of the wider software market. We are increasingly seeing the pivot from licences and support fees to subscription-based revenue models. They seem to prove far more attractive to investors and, therefore, far more attractive to Oracle.
By tying Oracle Support Rewards with its Universal Credit agreements (which have a minimum term of 12 months), Oracle is in a better position to expand its recurring revenue streams via those monthly payments for its Cloud services.
Amidst growing competition, it would appear that Oracle is keen to win favour with investors, pick up the pace of its Cloud adoption, and gain on the frontrunners of the Cloud marketplace.
The most likely candidate in the line-up of ’who is it all for’ is, of course, Oracle.
It’s common knowledge that Larry Ellison, co-founder and Chief Technical Officer of Oracle, likes to be number one; he himself even admitted that he’s “addicted to winning.”
So, despite suggestions that Oracle is using its Cloud business as a way to reinvent itself, it would seem the mega-vendor still has a one-track mind and is obsessed with beating out competitors in the marketplace.
“We’ve never really disclosed externally how much of our installed base is in that licensing business, but if we converted half of our installed base, we’d be talking about tens and tens of billions of dollars of OCI revenue, which would put us on the size of [Microsoft] Azure in a pretty quick order.”
– Ross Brown, Vice President of Cloud
Ellison suggested that the acceleration of Cloud migrations will serve to reinforce OCI’s position as the company’s fastest-growing business unit. So, this attempt to incentivise Oracle’s customers to make the move to OCI suggests that the vendor is still all about itself, and less about its customers.
Especially when we tot up those “tens and tens of billions of dollars of OCI revenue.”
Not only could Oracle Support Rewards facilitate significant uptake of its Cloud products and expand its subscription-based revenue streams, but there is also another, possibly less obvious, angle to this incentive.
Historically, mega-vendors have had such a small customer churn rate, so why are they offering loyalty rewards now? Well, we can think of one reason: third-party support is posing a genuine threat to Oracle’s profits.
By offering a reduction in support fees, Oracle is positioning itself more competitively in line with third-party support providers. Granted, it’s not the 64% we saved our customers (on average) last year, but it might still be enough to persuade customers from straying.
And, as we’ve already suggested, it could be Oracle’s second chance at a long-term relationship with these customers.
We’re probably all guilty of having only skimmed the T&Cs for a new contract at some point. It can be time consuming and overwhelming, so many of us may be tempted to simply accept the terms of an agreement without having taken the time to properly analyse the small print.
On the surface, Oracle’s Support Rewards seems like a win-win solution for customers, offering accelerated digital transformation and a reduction in those costly support bills. But, as is often the case with this mega-vendor, there is a catch – or several, as it were.
Some of the key caveats surrounding Oracle’s new reward scheme are as follows:
| THE LIMITATIONS | WHAT THAT MEANS FOR ORGANISATIONS |
| Discount can only be applied to on-premise technology licensing support fees | Customers cannot accrue rewards for Oracle applications support or Oracle SaaS usage. Instead, organisations will only be able to apply the support reward to databases and other on-premise Oracle technology product support fees. |
| Rewards only accrue when OCI credits are used (spend to earn), not when bought | The vendor has experienced a growth in demand for OCI credits once customers have been migrated. So, it’s likely organisations with a nominal spend on workloads initially could see their bill dramatically increase as a result of the rewards incentive generating demand for the purchase of more credits. |
| Discount only valid for 12 months from when the rewards have been accrued, and can only be applied to open invoices for technology support fees | In true Oracle style, this reward scheme is a ‘do it yourself’ gig, with the onus on customers to track and apply rewards to open invoices within the 12-month window of validity. The approach is ‘use it or lose it,’ meaning lots of rewards could go unclaimed if customers do not have the time or dedicated resources to monitor and apply the discounts. |
In addition to the above limitations that we think you ought to be aware of, there are a couple of other items for consideration when it comes to Oracle Support Rewards.
The first of which is that customers who sign up to Oracle Support Rewards may well think they are unable to negotiate better discount rates on the cost of a new Universal Credits (the subscription model offered specifically for Oracle Cloud) order.
Universal Credits, similar to an ULA, will see organisations paying Oracle based on its estimated monthly usage. To be considered eligible for the monthly subscription, you must first commit to a minimum of $1,000 (£720) a month for the first year.
If you do not spend $1,000 a month, you will lose the balance. And if you overspend then you’ll be charged a hefty “overage” fee.
If organisations are not able to accurately determine their average monthly usage, they could end up significantly overpaying for OCI credits. This issue will only be further inflated as these customers inevitably look to increase their consumption as time goes on.
By this point, it would become even harder to negotiate with the vendor. Oracle will have well and truly sunk in its claws, leaving many organisations unable to consider switching to an alternative provider due to the enormous cost and resources involved.
The second consideration is that Oracle Support Rewards is just another vendor trap. Oracle is, however, poising itself to play the long game this time, and it could well be that good things come to those who wait.
So, the long game. What does that look like? Well, in the first instance, Oracle is essentially leveraging its own Achilles heel (in the eyes of its customers): its notoriously high support costs. Enticing organisations to migrate to OCI is just the first play.
Oracle has said that rewards can be accrued on any workload running on OCI. The vendor has also suggested that existing customers could actually eliminate their support bills by migrating additional workloads. So, the temptation to continue upping the need for OCI credits could become irresistible.
But that is when the walls will start closing in.
If Oracle is able to convince its customers to move away from third-party applications and instead use its own SaaS applications, the vendor will be in a position to completely lock in those organisations.
And because Oracle SaaS applications can only run on – you guessed it – OCI, the option for customers to switch vendors in the future is almost entirely eliminated.
Game, set, and match.
In a bid to secure its future success (following many loss-making years over the past decade), it would seem that Oracle has read the room and used the (mountains of) feedback to curate a deceptively “generous” loyalty programme.
At the heart of Oracle’s generosity is a crafty plan to drive up OCI migrations, grow its Cloud business by “tens and tens of billions of dollars,” and lock in organisations.
Oracle Support Rewards might offer many organisations some light relief from their support fees, but we’re still mindful of the true intentions behind this offering.
In the same way that many supermarkets will entice you to splurge on those big brand products with nominal savings, Oracle’s discount is just another guise to encourage organisations to dig even deeper in their pockets for very little in return.
If you’re interested in making significant savings on your annual support bills, we can help.
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