Oracle software maintenance costs have customers turning to growing ranks of licensing consultants and third-party support providers. Here’s the skinny.
“Support is the Holy Grail for Oracle; it’s 90% margin and how Larry [Ellison] gets an island in Hawaii,” says Craig Guarente. “Everything they do is geared toward protecting that revenue.”
Guarente knows whereof he speaks. He spent 16 years inside Oracle on the contracts, licensing, and software-audit teams. He was global VP of contracts, business practices, and migrations when he and Oracle parted ways in 2011. Guarente is now CEO of Palisade Compliance, a New Jersey-based firm that helps Oracle customers with software contracting, audit intervention, license “optimization” (meaning getting the most out of what you paid for), and compliance-assurance (making sure you’re not using software you haven’t paid for).
Palisade is thriving, Guarente told us, because it helps customers “take back control of licensing and contracts.” Customers feel powerless, he said, because they’re not exactly sure what software they’re running and they’re even less sure of exactly what their contracts entitle them to use. “Once you’re in that position, you can’t negotiate price and terms effectively, and any vendor has you over a barrel.”[Want more on licensing snafus? Read Software Audits: Are You Ready?]
The usual consultation involves determining what the customer is licensed to use and what software it’s actually using. Palisade details the difference between the two in a License Scorecard report, but the next question is: Where do you want to go?
For example, “Do you have a new datacenter rolling out, a new disaster recovery plan, or are you moving into the cloud?” Guarente asks. “We lay out a roadmap and several options for moving from your current software roadmap to where you want to go from a licensing perspective.”
It’s easy to lose track of software because it’s deployed on so many servers in so many different locations. What’s more, enterprise software is seldom encumbered by software license keys, and vendors like Oracle make a habit of including every available feature in the software download, even if those features are typically extra-cost options. Finally, IT-oriented deployment and management tools that let you turn features off and on have no connection to or knowledge of your licenses and contracts.
It’s common for Oracle database administrators to run Automatic Workload Repository (AWR) reports to diagnose database problems, for example, but that tool requires that you have a license for the Oracle Database Pack. “There’s no message that flashes when you run that report: ‘Make sure you have a license for the diagnostic pack,’ ” says Guarente. But use of AWR and other features will undoubtedly be uncovered if and when License Management Services (LMS), Oracle’s audit arm, requests that you run scripts that gather details on all Oracle software usage. Commercial software contracts invariably give publishers the right to audit.
Palisade is one of the newer firms in this niche, but search “Oracle license compliance” and you’ll find plenty of competitors. Miro Consulting, for example, has been around for 14 years. It deals mostly with Oracle customers, but it also advises on Adobe, IBM, and Microsoft audits and contracts. The usual trigger for a consultation is a contract renewal, an audit, a planned hardware upgrade, or the start of a software asset-management program.
With the rise of software audits in recent years, many companies are installing software-asset-management tools to determine what software they are using, how often, and by how many people in the organization, but Tim Hegedus, senior managing analyst at Miro, warns that “no tool is capable of understanding the rules.” Oracle, in particular, is known for negotiating different terms for different customers. “Our value as a company comes from being able to understand the rules of the software publisher,” says Hegedus.
Hope of saving money is the big reason firms tap Palisade and Miro, and that hope has also given rise to another cottage industry of independent support providers. Rimini Street is the largest and oldest of these firms, while Spinnaker Support is a fast-growing rival. Both firms support both Oracle and SAP applications, and both made splashy announcements at this week’s Collaborate 14 Oracle user group conference in Las Vegas.
Rimini Street announced that it has more than doubled its base of Oracle customers to more than 130 companies, and it cited Brandeis University as an Oracle PeopleSoft customer that it’s helping to save $8 million on support over 10 years. Spinnaker introduced Oracle Database support at Collaborate, a service that Rimini introduced in 2011. This type of support is harder to offer because databases are compiled with software products, so Rimini and Spinnaker can’t touch the code and offer the same sorts of patches and bug fixes they develop for ERP and CRM applications with exposed source code.
“How do they patch Oracle?” asked Oracle president Mark Hurd at last week’s InformationWeek Conference in Las Vegas, co-located this year with UBM Tech’s Interop Las Vegas. “If you’re just a support provider and you’re not building the [intellectual property], you’re taking the IP for free and somehow providing patches and support — that’s a good economic model, but it has to be legal.”
Hurd was alluding to the ongoing lawsuit Oracle has pending against Rimini Street — a case that’s expected to drag into 2015. In the latest chapter of that legal brawl, a US District Court judge ruled in February that PeopleSoft licenses don’t allow third parties the right to obtain a copy of the software. The decision led Rimini Street to suspend hosting of its customers’ Oracle software in Rimini Street datacenters. But it continues to offer software support, including patches and bug fixes, at half the cost of Oracle support. In the case of Oracle Database, Rimini offers diagnostics and “super DBA services” including configuration and application integration support. The diagnostics can determine where the problem lies when things go wrong, whether that’s in the database, middleware, or applications, according to Rimini.
Miro and Palisade describe the third-party support providers as a good money-saving option when it’s clear you’re not going to move forward with a particular piece of software, but Guarente cautions, “You’re frozen in time in terms of the software that you’re using; if you’re using 7.1.1 and you go off of Oracle support, you can’t use 7.1.2. As long as you understand what you’re getting into, that’s fine.”
As for ways to save on support from Oracle, Guarente offers a few points of advice:
•Don’t assume that IT-oriented license-management tools and methodologies will keep you in compliance with your contracts and license rights. Oracle LMS relies on scripts, policies, and contracts, not the tools IT uses, to determine software usage and rights.
•Don’t assume an unlimited license agreement (ULA) will cover use of instances on Amazon Web Services or other clouds. Make sure contracts spell out where you can use licenses and that they will count toward what’s covered by the ULA.
•Be prepared to negotiate. Customers too often renew ULAs and face higher costs because they’re not armed with certain knowledge of what they are and aren’t using and what’s covered by the current agreement. “If you keep renewing, your support costs go up and up,” says Guarente. “With knowledge you can negotiate something better.”
Palisade and Miro declined to detail the cost of their services, saying it varies widely depending on the extent of software deployments and the goals of the engagement. Hegedus said Miro typically works for a fixed fee in a 6- to 12-week engagement, during which time customers can ask all the questions they want. He also said there’s a performance guarantee whereby the company’s fees will be “matched or exceeded by the cost savings.”
Whether you tap an advisor or not, the first step toward taking control of support cost is getting a handle on what software you are using and what’s covered in your contract. Without that knowledge you’re flying blind and leaving it up to the software vendor to do all the measurement and interpretation.