Auto renewal on your maintenance and support agreements need to be closely monitored. It is better that you leave the auto-renewal alone, so that you are in a better position to renegotiate each year. It’s at this point that the lack of a central repository or tracking mechanism may become really obvious because without knowing throughout the year when the renewals are coming in, it becomes difficult to budget and it can get you into trouble. It’s important to note that within agreements of Oracle, support renewals may contain their own Terms and Conditions which may alter some of the Terms and Conditions that you fought so hard to negotiate within the original ordering document. It’s really important that you factor in these support renewals and the support costs during the procurement process and scrutinize those during the support renewals. You could end up thinking that this is just a purchasing exercise of support renewal year to year when you actually may be devaluing that big investment you made.

Procurement is a tough job from any perspective. You have multiple requests at once for some kind of technology investment, which must be run through various channels, negotiated (if at all) and then implemented. We find in many cases that the job is made more difficult by a lack of policies in place. Policies are, in many cases, either not in place, not well implemented, or not being communicated.  Managing procurement with vendors like Microsoft and Oracle, in some cases, will require its own dedicated person within the organization. This function requires somebody with a lot of specialty to keep up with the frequent changes within Oracle.

One easy improvement that can be made within a procurement process is to have a system in place for analyzing software and hardware contracts as they arrive. Standardized processes are also extremely helpful. In the case of companies that are the product of consolidations or mergers, each company will have different processes which are badly in need of consolidation.  It is important to have a real compliance management process with definite policies and enforcement in place. To help with your internal compliance, you need to have some means of doing an internal audit on a relatively frequent basis. If you can’t manage this process internally, outsource it.

With software and hardware vendors, timing is everything in terms of negotiation. With a strict set of policies and procedures in place, your procurement department will be better prepared to respond in a timely fashion and take advantage of quarter and year-end concessions and discounts. Planning and forecasting your needs is also a vital part of this process, but a lack of policy is the most common issue with procurement, a flaw that can end up costing organizations a lot of money.

Why not put your existing Oracle assets to work without having to commit to a large upfront investment?

License rebalancing^TM is the art of taking existing licensing - such as Concurrent, Named User, application specific and/or CPU-based licensing - and converting them to generate a new license that is more value to your organization, while creating cost efficiencies. It is possible and very probable that the initial act of rebalancing your Oracle licenses will result in an initial 5-10% savings. Over time, the savings will increase exponentially due to the initial insured lower support cost (which was right-sized due to the license rebalancing acts).

It may seem like you’re only trading in your licensing for something of equal value, but the reality is that you get a greater value by gaining flexibility in your licensing (especially during times of corporate growth or change), same or better Terms & Conditions, and possibly lower annual support costs.

The name of the game is to increase the license value to your organization while possibly reducing your annual support payment without sacrificing benefits. You want to ensure that you have the best value - not just in terms of dollars and cents - which can often turn from short-term savings to long-term pain of having to spend more and more on new licensing every year because the initial purchase/re-up didn’t allow for flexibility for growth.

While some information on Oracle’s acquisition of Sun has been made public, there are still a number of unanswered questions - one of them being about licensing. While we don’t have any more information on this, but we’re speculating that it can be a very sweet deal for the right company.

Today, mergers and acquisitions are as common as marriages or people setting up households together, and may present unfounded opportunities for lowering your Oracle support stream and uncovering more favorable terms and conditions.

Reinstating terminated support. When a company takes on an acquisition or makes a divestiture, the hard assets - furniture, equipment, electronics, etc. - are easily categorized or sold off, but it’s easy to overlook “soft” assets such as software, licensing and support. In both scenarios (M&A or divestiture), you likely have access and/or rights to reinstate a more favorable prior support stream, creating a more advantageous environment including pricing. Please note: Terminated licenses cannot be reinstated as we accidentally and incorrectly mentioned in this morning’s newsletter.

Don’t forget about support renewals. Many of your older software vendor contracts probably have some sweet Terms & Conditions that you don’t want to lose. Remember that you are responsible for the annual support renewals (and not your Oracle rep). Every time you allow a renewal to lapse, you lose those advantageous T&Cs and licensing goes up between 15 to 25%.

The initial questions to ask yourself are:

The name of the game with any software licensing agreement is to get the best deal, but most executives equate this to discount. And, while we love discount, you always have to look at the longer term pitfalls or benefits. Much of the time, a sales rep offering you a discount – say 20% - on a large enterprise agreement negotiation, it sounds great. But, when you look at how software licensing works, the changing dynamics and business goals of a company and the upcoming changes (and, boy, are there a lot of those at companies today), that 20% discount may save you in the short-term, but in the longer term, you’ll end up spending more because you haven’t planned for the long game and there is little or no flexibility in your software license agreement (SLA).

So, what should “getting the best deal” from your software vendor mean? Yes, sometimes it does mean getting the best price. That’s definitely a factor, but you also have to look at:

If you pay attention to all of the above, you will get the best deal – from best pricing to best value.

Get it in writing. Get all assumptions clarified and then confirmed in writing. You don’t want to assume anything and any discussion or email in which you are getting the best leverage should be mentioned in detail within your agreement. We see a lot of our clients - even the largest Oracle enterprise - treat emails and verbal discussions as legally binding agreements, which is untrue in the case of an Oracle software licensing agreement. It is not up to the sales person to remember what he/she promised you or what concessions were discussed and agreed upon. It is up to you to remember and make it legally binding.

Confirm assumptions with examples. For example, your SLA may state that you have worldwide usage rights. You assume that you can use your Oracle product anytime, anywhere. However, that would very likely be an incorrect assumption. You should inquire whether the worldwide usage rights are affected by:

We often drill down to these small, but extremely important, details during the discussions we have with Oracle on behalf of our clients. When you clarify all the assumptions, the last step is to ensure that there is language within your SLA that defines usage more clearly.

Never assume a License Usage Right.  If you think that your Oracle license allows you specific actions or specific functions, you need to check your SLA. For example, if you have eBusiness Suite and you assumed that the collection module was included in the accounts receivable functionality (which is reasonable). The collections module is actually a separate module and a separate cost.

Never assume that the vendor doesn’t know. We have many companies come to us for the first time and they tell us about a yet-to-be disclosed data warehouse launch, a merger or company acquisition, layoffs, or other major corporate changes. Often, the company believes that Oracle doesn’t know about it and they want to know what their SLA options are.  However, don’t be too sure of that. With larger companies, it’s not too hard to find information about the organization including the inner workings and operations.

We get a lot of questions about Oracle’s processor core factors. Core factors can change and this is particularly difficult when you’re the person in charge of tracking changes in licensing or the procurement process. Case and point, the Sun UltraSPARC T2+ core processor licensing changed from 0.75 to 0.50. As soon as the change is in effect, your organization is considered out of compliance.

See Oracle Processor Core Factor Table, which charts vendor and core processor licensing factors. Changes can be found as a footnote at the bottom of the page.