"The problem is that there's no competition,"
It seems like an unwinnable situation. If you've already committed to Oracle's ERP solution, you're unlikely rip it out and replace it with SAP's solution. But Guarantee insists that customers can have enough leverage to optimize their contracts with Oracle and negotiate cheaper software license agreements. Just don't expect it to be easy.
"The key to understanding Oracle is understanding their self-interest. They make 90 percent margin on support. Everything in their contracts is to protect that money," he says. "They're a huge software company, but they're a bigger services company."
The first bit of advice Guarente shares is how not to approach Oracle when you want to rewrite your contracts. He believes that telling the vendor that you want to spend less makes you a target for auditing—and, in the end, Oracle will find a way to extract just as much money from your IT budget.
"The first four customers of Palisade had the same story: They all went to Oracle, asked for help to reduce their spend, were audited, and found with multi-million dollar compliance issues," remembers Guarente.
An audit with Oracle isn't simply a black-and-white matter of counting seats and comparing usage with contracts. Guarente says that Oracle cares also about how you're using the software, where you're using it, and who's using it. So educating your team on how they can and can't use Oracle software is critical—and if you don't do it, eventually, Oracle will.
According to Guarante, "Oracle's philosophy is to throw it out there. Let customers have access to it. Eventually they'll buy it—they'll either love it and buy it, or we're going to catch them."
Negotiating with Oracle
The crux of Guarente's advice is to stay in control. Know exactly what Oracle software you're using, know exactly what you've licensed, and know what you will need in the future. Understand, too, the vendor's "divide and conquer" strategy. Don't let your sales rep pressure you into signing a contract—know that Oracle's new fiscal year begins on June 1, so the closer to May 31 you can hold off, the better your deal will be. Remember, in order to meet their quotas, sales reps need to log new sales along with renewals.
Guarante underscores the importance of getting the contract right up front. He suggests buying applications separately. If you stop using something, Oracle is likely to re-price everything else to equal the same amount of money you were spending, he says.
Even if you get everything right, you may still face an audit. Guarente stresses that you're allowed to disagree with the vendor's findings. Just be sure you have the facts to support your case and have confidence in your numbers. Oracle believes it's the customer's responsibility to stay in compliance, so you need to be able to prove that you are compliant.