In Episode 5 of our Oracle video briefing series, we’ll take a look at Oracle Cost Reductions. Achieving cost savings on spend is a key priority for many Oracle customers, and this blog will explore what savings are out there to be made. This includes savings on support stream – whether volume-based or via support caps – as well as licensing savings, where price holds, usage, license migration and processors vs NUP all come into play.
Cost Reductions overview
Oracle has some stringent rules on products that its customers already own, making it difficult to reduce costs for those products that are already deployed. However, if you are looking to renew your Oracle contract, or are planning on negotiating a new deal with Oracle, there are numerous costs reductions to be made. Below are some key things to keep in mind.
What to consider
Support savings – One of the first things you can do make an impact on your cost reductions it to ensure that the support caps term is included in any new or renewed Oracle contract. Without it, it is standard practice for Oracle to increase annual support maintenance between 3-10%, depending on region. However, with the support cap term in place, it is possible to have this increase waived for a set period of time. While the finer details rely on negotiations and the value of each particular deal, it is not uncommon, especially for renewals, for Oracle to administer a 0% uplift on support costs for between three to five years. But note that the three years’ reprieve is significantly easier to attain, while the five year’s grace period is only granted under very specific circumstances.
Volume-based savings – Another potential cost-saving avenue is by reducing Oracle’s standard 22% support rate through volume-based discounts. For example, the 22% is typically lowered to 20% when acquiring a minimum of $5m in licenses fees, and can even go to as little as 18% with a $20m price tag on license fees. Whilst these figures may appear daunting for many Oracle customers, if you bundle your deals together as well as establish your future demand, you can aggregate your requirements to meet the $5m at the very least. However, be careful not to include everything into a single contract, as this could land you in hot water. During negotiations, Oracle will give you the opportunity to buy several contracts and our advice at Livingstone would be to do just that, breaking down high-value deals into smaller deals. This ensures you have the flexibility of smaller deals and can cancel each individual contract separately, whilst at the same time reaping the benefits of bundling them together to reach the volume-based support cost-savings.
Price hold license savings – Whilst contract price holds don’t have the immediate impact of a direct saving, they set expectations with Oracle from the very beginning of a contract. Discount comes with volume at Oracle, so with a price hold in place any initial discounts are set in stone for the duration of a contract term and provides a good starting place for any future negotiations.
What can I do?
Limited vs full-use licenses – Understanding how your licenses will be deployed is key to identifying areas where cost-savings can be made. Indeed, by knowing how and where your licenses will be used, you can assess the possibility of running limited-use licenses rather than full-use and expect that the limited use licenses (e.g for test & development) to come with a lower price tag. If you can shine a light on places where limitations are possible – for specific uses or for test & development, for example – Oracle will be able to offer higher discounts than on full-use licenses. Understanding your deployments is key to understanding your licensing needs, and if you don’t plan on using the full capability of a license then accept the limitations and make savings in the process.
License migration – Repurposing – or migrating – existing licenses you are no longer using can also be an effective way of reducing costs. When applications become redundant and the licenses are no longer needed, it is possible to migrate them across to your new Oracle contract. The minimum price Oracle has to charge you for these licenses is 10% of list license fee. While the actual price will come down to negotiation and depends on whether the licenses will be full or limited use, if customers find they have old licenses or metrics they aren’t using anymore, by migrating them across, they will pay a fraction of the price of buying new licenses. In addition, by keeping the old licenses running, you could end up paying double support fees for both the licenses you aren’t using, as well as for any new licenses you’ve purchased.
Processor vs NUP – It’s no secret that Oracle pushes processor licensing, as it simplifies costs and is relatively straight forward for customers to administrate. But it’s important to consider whether these processors can in fact be Named User Plus (NUP) licenses instead, which can significantly bring costs down. Oracle has a standard requirement that for every processor license, you would need to have at least a minimum of 25 NUPs – but if you’re using these licenses for test & development, for example, the number of NUPs can be lowered. Similarly, if you are negotiating a significant enough deal and can prove to Oracle that you can actively manage the NUP user base, Oracle is willing to grant lower NUP licenses per processor. This results in better deals and higher cost savings.
These are just some of the most effective ways we’ve helped Oracle customers realize savings at Livingstone, but there are many other ways to reduce your costs, now and in the future. By controlling and optimizing your Oracle investments and deployments, for example, you can gain valuable understanding of your compliance, consumption, costs and contract. To find out more about managing your Oracle estate, register for our full Oracle Briefing Series here.
Or for more information, visit our dedicated Oracle page, email us on info@livingstone-group.com or complete this form and one of our contract experts will be in touch.
Further reading & Oracle content...
Video series: Oracle Briefing Series.
Series of six short Oracle briefings helping you to prepare for 2022.
Article: Five ways to ready your organization for vendor audits
Or for more information, visit our dedicated Oracle page, email us on info@livingstone-group.com or complete this form and one of our contract experts will be in touch.
About the Author
Razvan Tarnovschi, Oracle Practice Lead
Razvan joined Livingstone Group in 2021 as Oracle Practice Lead and brings with him 13 years of Oracle experience. During this time, his responsibilities included negotiating high dollar value contracts with customers. Razvan has a deep understanding of the language of Oracle's complex contracts including policies and terms.