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Oracle ‘breach notice’ bullies enterprise clients into cloud service, consultant claims

Fri 10 Jul 2015

A consultant has claimed that The Oracle Corporation has this year adopted new and aggressive techniques to drive its enterprise clients into adding unwanted cloud options to existing contracts in order to avoid being driven completely out of the Oracle infrastructure.

Speaking to Business Insider, the unnamed consultant described the tactic, known as a ‘breach notice’ as a ‘nuclear option’ – and claims it is one which Oracle has only begun to emphasise in its business proceedings this year.

Oracle software is licensed on a per-user basis, with actual usage of added services a separate metric. Changing the contracted configuration of a company’s Oracle license, for instance by adding new services or additional users, will trigger an ‘audit’ of the contract – the point of vulnerability during which, it is claimed, Oracle coerces users into engaging with its commercial cloud offerings or else risk being told to stop using all Oracle software within thirty days.

During the audit any out-of-compliance activity from the client involving the use of Oracle services can invoke the breach notice. Even though the client may have arranged bespoke systems which do not make use of Oracle’s cloud services, the ‘punishment’ for OOC infractions is reportedly the adding of long-term commitment to Oracle Cloud products – a practice which in many cases is likely to turn the customer from an occasional consumer into a long-term tenant.

Lock-in and lack of portability of Oracle customer set-ups are most likely to occur where the client is not already using the more templated SaaS and PaaS services, such as Oracle Transportation Management (OTM) and Global Trade Management (GTM). In such cases a 30-day migration to alternative arrangements is completely impracticable.

However, should the client have any other recourse, Oracle risks to lose their business entirely under the edict of a breach notice. Hence the confirmed 500-700% increase in commission taken by Oracle’s salespeople on cloud sales compared to the rest of the company’s technology portfolio.

Craig Guarente, President and founding partner of Palisade Consulting Group, LLC – part of a considerable business arm dedicated to helping companies negotiate the best terms for Oracle licensing – expands upon the consultant’s disclosure: “An audit is like a box of chocolates. You never know what [you’re going] to get. It could be very pleasant, very nice, or not,”.

Speaking anecdotally of the company buzz around breach notices (Guarente was employed as a contract negotiator at Oracle for 16 years prior to founding his own Oracle-based consultancy), Guarente says “Internally, the water cooler gossip there is that they’ve never seen this kind of aggression before. Oracle has really dialed it up…Customers are buying cloud services to make the Oracle issue go away, not because they have any intention of using cloud services,”

The disclosure comes in the wake of mixed – but generally disappointing – results for Oracle’s fourth-quarter earnings, typically its strongest. Its poor performance was attributed by the company to unfavourable exchange rates with the dollar, with results varying significantly absolute gains and loss and ‘constant currency’ equivalents. Nonetheless Software and Cloud Revenues rose 1% at $29.5bn, with Cloud SaaS and PaaS revenues at $1.5 billion, a rise of 32%.

Last month Oracle CEO Larry Ellison announced the company’s intent to make a significant incursion into Amazon’s share of the cloud market, during the launch of six new Oracle platform services.


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