Software // Enterprise Applications
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4/10/2014
12:15 PM
Doug Henschen
Doug Henschen
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Oracle Support Costs: 2 Savings Strategies

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.

Cottage industries
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,

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Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio

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jagibbons
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jagibbons,
User Rank: Ninja
4/14/2014 | 9:19:33 PM
Re: Seeking Relief? Should you ask Oracle LMS
Support revenue is huge for Oracle. Given my personal past experience, it's extremely high margin as well as shown by the poor quality of support. Full disclosure: I am a Rimini Street customer for supporting our very stable and very customized implementation of PeopleSoft Financials.
RobPreston
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RobPreston,
User Rank: Author
4/14/2014 | 5:04:34 PM
Re: Seeking Relief? Should you ask Oracle LMS
Doug, the "horror stories" you reference, about customers who seek cost reductions from Oracle winding up getting audited, reminds me of a tactic I used as an adjunct college professor: I warned students that if they came to me to complain about a grade I gave them, I'd review my grading of not only the question they single out, but also my grading of the entire test to see if I had been too lenient elsewhere. Very few students came to me complaining about their grades unless they were reasonably certain of their position. Oracle is taking the same tack...and I don't blame it.

 
dabron
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dabron,
User Rank: Apprentice
4/14/2014 | 3:09:15 PM
Just another savings option
Nice article, Doug. I'd like just to mention another option that customers can use to save support costs. Oracle customers can use Oracle Standard Edition which costs much less comparing to Enterprise Edition. Furthermore, they can use some free tools which do not require additional licensing: for example, expensive Oracle Diagnistic Pack can be replaced by free STATSPACK  tool which is delivered with Oracle and does not require licensing. Using such free tools with inexpensive third party software solutions can be very effictive and save a lot of money. For example, there are several companies which offer inexpensive solutions for Oracle Standard Edition based companies like spViewer Software or Dbvisit, etc.
BrettM460
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BrettM460,
User Rank: Apprentice
4/11/2014 | 2:22:48 PM
Re: Oracle licensing and support cost reductions.
I agree completely.  The challenge customers have is to know who to trust, who is independent and are the "things" being suggested or recommended in the best interest of the customer or the seller.  I'm a fan of references.  I call it "Referential Selling".  Let my body of work speak for itself.  Some leave a trail of tears and others happy customers.  If you rely on reviews, blogs or forum comments what you end up with are the proverbial "Chevy" people are offended when the "Ford" crowd calls their truck junk and vice versa.  Name calling ensues, etc.  Becomes difficult for a customer trying to do their homework to know if a slam by a Ford fan is valid or just a shot.  My parting comment on my original post is that with Power servers, customers will probably never need to buy more Oracle licenses.  As the technology improves generation over generation they more more performance per core so each license delivers more results.  It seems that with x86 is where the servers overall core count is getting larger while the overall core performance seems to decrease generation over generation so more Oracle is continually required just to refresh the servers.  Just my observations.
craig guarente
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craig guarente,
User Rank: Apprentice
4/11/2014 | 12:28:37 PM
Oracle licensing and support cost reductions.
@Brett, moving to IBM is a strategy to use, sometimes however the contracts get in the way of executing that strategy.  We have helped customers make that transition when needed.

One other thing to note.  It's really really important to get advice and guidance from someone who doesn't make more money when you buy more Oracle.   Companies that resell Oracle (i.e., Miro) have a vested interest in you buying more Oracle.  Independent firms have no conflict of interest.

Regards,


Craig Guarente
D. Henschen
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D. Henschen,
User Rank: Author
4/11/2014 | 12:20:01 PM
Rimini ruling will set the tone for third party support
Everyone will be watching the outcome of the Rimini ruling because it will set a precident for third-party support. Rimini is the oldest and largest player, and if the model is affirmed, it will clear the way for Spinnaker and others. What's the right comparison? Is software like a car, which you can bring to the dealer or to a third-party mechanic? Or is it something others can't legally touch? This case will drag on. Even if a court decideds next year, as expected, there will surely be an appeal. There's a lot of money at stake.
BrettM460
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BrettM460,
User Rank: Apprentice
4/10/2014 | 10:06:55 PM
2 ways to reduce Oracle Supports costs
There are only two ways to reduce Oracle support costs: 1) Don't use Oracle and instead use another enterprise DB like IBM's DB2 or for the open source crowd EnterpriseDB's PostegresQL.  2) If you must run Oracle then run it on IBM's Power servers. 


IBM's Power servers are the only platform that control Oracle licensing cost. Alternatives like x86 are designed to grow software licensing to overcome their inability to scale and inherent unreliability.  They also require all cores to be licensed regardless if the license factor is .5, a 48 core server is still 24 cores and mix in RAC to cluster and it now becomes 48 cores of Oracle EE + RAC which is $70,500 per core + 22% annual maintenance.  Oracle's SPARC servers are only a little better.  The T5/M5 have improved performance but are RISC versions of x86 servers. In other words they are lacking the traditional RISC availability features.  IBM's Power servers let you allocate only the cores needed for the workload and license just those cores.  Even though the license penalty box factor is 1.0 that may be 8 cores when the 48 core is still 24 licenses.  Because of the efficiency of the Power Hypervisor and the ability to drive the utilization rate it isn't uncommon to see a 4:1, 6:1 or even a 10:1 reduction in cores and thus licenses due to these efficiencies.


Because Power servers have true mainframe heritage RAS features underpinning them all you can often eliminate expensive cluster software like Oracle RAC and additional servers as you consolidate multiple workloads onto fewer servers.

When you reduce Oracle licenses you reduce support costs.  22% times 8 licenses is much less money than 22% times 24 licenses....every year.  That is how you keep Larry from buying the next Hawaiian island so your business can reinvest, maybe maintain benefits or even consider raises.


Go with DB2 on AIX on a Power server and you get built-in compression, clustering, tools, performance pack, BLU acceleration and much more where you would pay for each of these features separately with Oracle.  Choose PostgresQL as the DB with Linux on Power servers and you get the reliability, scalability and virtualization flexibility with the open source benefits. Last results I saw using IBM's Advanced ToolChain compiler it delivered roughly 2X the results for the same workload running on x86.

It may sound like a commercial but it also may be true.  If it is true, is your business identified by what servers and OS it runs or by the results and savings produced by that solution? 
D. Henschen
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D. Henschen,
User Rank: Author
4/10/2014 | 1:08:55 PM
Seeking Relief? Should you ask Oracle LMS
Guarente shared plenty of horror stories about customers seeking cost reductions from Oracle and winding up getting audited. I guess from Oracle's perspective, they have to know what you're using to if they're going to come up with a strategy to save you money, but Guarente says cusotmers tell him they try to drop unused software or lower the number of users but they still end up paying more. Is that a sales pitch for Palisade Compliance services? Share your experiences with Oracle LMS with a comment.
Laurianne
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Laurianne,
User Rank: Author
4/10/2014 | 1:04:19 PM
Spinnaker and Rimini Street
Doug, how does Spinnaker's position compare to Rimini Street? Would it be similar legal ground for Oracle?
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