Over the last years, Oracle has been successful in transforming its own Oracle ERP on premise customers to its Oracle Fusion Cloud Service. In its journey to transform end-users to the cloud, Oracle is heavily competing (and rather successful) in winning over SAP ERP customers to switch over to Oracle Fusion Cloud and has been named by Gartner as a Leader
Early adopters from Oracle’s Fusion Cloud Services have however as well been already confronted with the first “compliance claims” associated to unlicensed use of Oracle Fusion Cloud Services. Many end-users thought “with the cloud, there are no compliance issues anymore”; but…. the reality is however different.
In our previous article we focused on how the actual license metrics of Oracle’s Fusion Cloud Services dictates the importance of setting up and monitoring your users and the most common compliance issues seen at Oracle Fusion Cloud customers. In this article we will focus on the different non-standard terms you can negotiate with Oracle during your next Oracle Fusion negotiations.
Non Standard Terms
As with almost any commercial negotiation with Oracle, there are – next to the pricing applied – several non-standard contractual terms that you would like to negotiate in your new Oracle Fusion Cloud agreement. You would typically like to think of these non-standard terms, to protect your company for any unexpected costs and risks in the future.
This includes amongst others:
Fixed discounted fees for additional quantities of cloud subscription and/or additional cloud subscriptions to be obtain during (and after) the initial term of the cloud subscription (e.g. due to additional users or additional cloud subscriptions required during or after the implementation phase). This provides you protection for future negotiations and cost increases.
This renewal cap ensures the renewal fees for the cloud subscriptions (that you may want to renew at the expiration date of your initial cloud agreement), will not increase with more than a certain fixed percentage. This provides you protection for future cost increases.
The right to shelf your on-premises licenses (without having the requirement to terminate the licenses) and to continue to keep support for your on-premises licenses (without any additional costs), enables you (especially during the migration period from your on-premises deployments to the Oracle Fusion Cloud) to perform a smooth transformation. This provides you a cost saving opportunity.
The right to rebalance the fees as paid for un-used cloud subscriptions to other cloud subscriptions (you may require going forward), without additional investments to be made. This provides you a cost saving opportunity and get more “value for money”.
You should think carefully about your “customer definition” enabling all the different legal entities (as they are now part of your organization but also in the future due to mergers or acquisition) are entitled to make use of the different cloud services.
Data Center Region:
Do perform your due diligence on the actual data center region (EMEA, NAMER, other) from which your Fusion Cloud solution should be made available, considering your data security and data privacy requirements as well as Oracle’s ability to provision from a specific data center region.
You would typically not want your contract to specify that you will automatically renew your cloud subscriptions. It’s the best practice to make sure that each renewal is an informed business decision of your organization. In preparation of your renewal, you are recommended to have a close look on the actual consumption of the different cloud services and associated (then current) subscriptions, to evaluate the best possible commercial scenario. Insights helps you to avoid and save costs!
Target Application Response Time & Service Cloud Credit
By moving to a SaaS solution, you are no longer having any direct influence on the actual performance and response times of your former (on premise) applications. You are depending on Oracle. In case a certain uptime or response time cannot be met, you would normally want to be compensated for this. Ask for a service credit in return, if the agreed performance and response times cannot be met.
Successor Cloud Services
Oracle reserves always the right to bundle or re-bundle specific cloud services as initially available into other or new cloud subscriptions. But what happens if you initially bought cloud subscription A, and after 1 year Oracle decides to no longer make this cloud subscription available? Always make sure that your agreement states that you are allowed to continue to make use of the newer cloud subscription, against the similar or lower discounted renewal rates.
Termination for Convenience or Chronic Unavailability
Transforming to the cloud is a big step for many end-user organizations. But what if the cloud service does in the end not satisfy your requirements? Or what if the cloud service is (for whatever reason) for a long time unavailable? Requesting a termination for convenience clause in your agreement may be helpful. Having such clause enables you to exit the Oracle Fusion Cloud Service, when you want so.
Alternatively, you request Oracle to be able to terminate a specific cloud subscription (if this cloud service is for a long time not available), demanding Oracle to pay a refund (for the associated upfront paid fees) in case such situation occurs.
Flexible Use Terms
At the start of the “transformation”, your functional and technical administrators do try to quantify the actual requirements to the best of their abilities. But it’s all new and who knows exactly what is required? What if the number of subscriptions bought is way more than required? You would want to include a clause in your agreement, allowing your company to reduce the quantity and usage of the cloud subscription by X%. Oracle would typically limit such reduction to be done only once per calendar year. The reduction of the quantity and usage of the cloud subscriptions should result in a proportional reduced cloud service fee, which helps you to save costs going forward.
In case you are forced to obtain a cloud subscription that includes a large amount of cloud services you do not require, think about restricting the use rights of a that specific cloud subscription. A restricted use subscription typically results in a justification for a lower fee and as such a cost saving opportunity!
Oracle typically refers in its ordering documents to a number of online documents (e.g. Cloud Hosting & Delivery Policies, License Definitions and Rules). You are at all times recommended to make sure that a copy of these terms is added as an Appendix to the ordering document. This to make sure that both parties have a clear view of what terms are applicable at the time the order has been signed, since these terms are subject to change at Oracle’s discretion.
Although many end-users thought that with the “cloud” all the compliance issues are gone, the reality is completely different. Having a clear and accurate up to date understanding of the obtained rights from your cloud subscriptions and reconciling these with your actual consumption of the different cloud subscriptions on a regular basis, continuous to be required to avoid and save costs.
About the author – Richard Spithoven
Richard is the Global Lead for Oracle License and Commercial Advisory Services at SoftwareONE. Before his current role, he was one of the managing partners at B-lay. Richard brings more than twenty years of relevant license management experience to his role, having previously served as Regional Director of License Compliance at Oracle Corporation. Richard uses his knowledge of enterprise software vendors to educate, equip and enable software end users in their challenges regarding proper software license management. Richard holds a master’s degree in IT, from the University of Amsterdam in the Netherlands.
Richard is the LISA Course Leader for the Oracle Licensing Training Course