April 15, 2011, 3:17 PM — Oracle is now in its fourth quarter, meaning the vendor and its customers are locked in the annual ritual of trying to get new deals done before the fiscal year ends on May 31.
The company has long been known as one of the industry's toughest negotiators, and that hasn't changed a bit this year, according to some observers. But there are a number of strategies customers can employ to ensure the best possible deal, according to some users, consultants and analysts.
One way is to think big.
Oracle's sales representatives have a short-term focus, "so they will prefer to get one big order now than get several smaller orders over the next three years, even if the latter would add up to more money in total," said Forrester Research analyst Duncan Jones in a report released this week.
Therefore, salespeople may be more generous with discounts and other concessions if the customer agrees to a larger purchase, he said.
The question to weigh is whether such a move makes financial sense in the longer term, since annual maintenance fees may kick in on some products before a customer is actually prepared to start using them, Jones added.
"Oracle's discounting policy can lure you into buying excess products and capacity and then you are doomed to pay maintenance on this shelfware forever," he wrote.
Shelfware -- unused software -- remains a pervasive problem in the IT industry, according to a new survey commissioned by 1E, maker of AppClarity, an application that looks for "software waste" in an organization's IT environment. More than 80 percent of roughly 500 respondents to the study in the U.S. and UK said they had shelfware.
Maintenance fees over time add up to far more than the initial cost of licenses, which are commonly discounted substantially off list price. Vendors prize maintenance fees, since they provide steady revenue even when new license sales are hard to find. This makes it difficult for customers to get vendors like Oracle to budge.
The only time Oracle customers have real leverage over maintenance fees is during a new license negotiation, when Oracle might agree to keep those costs flat for a couple of years in exchange for a large purchase, Jones said. Oracle might also agree to adjust maintenance fees customers are paying on shelfware in exchange for them buying something else, he wrote.
In the current environment, some deals may be easier to get than others, though.
Oracle is being less flexible on discounts for products they consider to be "best of breed," said Eliot Arlo Colon, president of Miro Consulting, a Woodbridge, New Jersey, firm that advises clients on Oracle license negotiations.
Overall, sales representatives have been pushing hardest on Fusion Middleware, BI (business intelligence) and security products, he added.