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Cloud push complicates Oracle contracts, compliance efforts

In order to predict what 2017 holds for Oracle licensing, a look to the company's past can help reveal where it's headed -- and that means more pressure on users to go to the cloud.

It can be difficult to write about Oracle's likely actions over the next 12 months because the answer to the question,...

"What will Oracle do this year?" is usually, "The same as Oracle did last year, only more of it." Also, unfortunately, Oracle doesn't tell me what its plans are anymore. Therefore, this look into the future of Oracle contracts and licensing is based on 16 years of experience working at Oracle and over five years at Palisade Compliance helping companies work with Oracle -- oh, and a brand-new crystal ball I received for Christmas.

Despite its reputation as being hard to do business with, Oracle is tremendously predictable in its sales and go-to-market strategy, business practices and acquisitions. If you want to see what's ahead for Oracle, just look in the rearview mirror. Well, that's usually the case. However, this year could be different, at least in some ways.

With that in mind, here are five things to expect from Oracle in 2017.

Oracle continues to push further into the cloud. Duh. Everyone knows this. But for Oracle, this will mean additional acquisitions -- and additional pressure on its existing customer base to adopt Oracle's cloud. We've seen some, er, very interesting tactics from Oracle to push its cloud services. One is a new twist on its internal ABC compliance approach.

Originally short for "audit, bargain, close," it's now also known as "audit, bargain, cloud." Auditing customers over their license compliance has long been a staple at Oracle to get customers to move in the direction in which it wants them to go. For users, though, this always means giving Oracle more money. In 2017, you can expect more audits so Oracle can claim more cloud revenue.

Customers actually look to move to the Oracle cloud. At Palisade, we help customers with their Oracle licensing and contracting. For the last couple of years, with the exception of a handful of customers, we've only seen companies buy into the Oracle cloud because they were being forced to do it after being audited. The new ABC pitch from Oracle is, buy these cloud technologies and we will make the audit findings go away.

But I think 2017 is the year that we increasingly see customers want to buy Oracle cloud services. We've already seen an uptake in inquiries from companies looking for help with Oracle contracts in the cloud. This will accelerate as Oracle consumes NetSuite and has more best-of-breed cloud services to offer. It's the same way Oracle grew its applications business -- think PeopleSoft and Siebel.

NetSuite customers face Oracle business practices in earnest. As my mother would say, "They are in for a rude awakening." It takes a while for any company to completely consume another and align people, processes, systems, marketing, etc. But that will happen with Oracle and NetSuite this year. If you have a great deal with NetSuite, don't get used to it -- because if history is any guide, Oracle will try to combine NetSuite revenue with Oracle revenue so they can't be unraveled from one another when it's time for customers to renew their Oracle contracts. Think Oracle's support repricing policies, which reduce discounts on support contracts when customers drop some of their Oracle licenses. I wouldn't be surprised if there were some cloud repricing policies on the horizon.

The question will then be, how do you expect the cloud to affect Oracle's licensing policy? I expect Oracle to try and intermingle license, support and cloud policies in a way that makes it extremely difficult for their clients to reduce ongoing spend with Oracle. I also expect it to be even more difficult for Oracle’s customers to manage their Oracle licensing as cloud usage/policies are added to the already onerous on-premises usage/policies. 

Oracle becomes harder to do business with. Yikes!! Did I just say that out loud? Oracle is notorious for being hard to do business with -- how could it get harder? Two reasons. First, as Oracle sells more cloud services, that adds yet another Oracle license that clients must manage. Almost all companies will end up in a hybrid on-premises and cloud environment.

It's difficult to deal with Oracle when you just have on-premises systems -- in the cloud, you have to do so when it holds some or even all of your data for you. In fact, Oracle contracts for cloud services give it the right to use your data "for license management purposes." That's right: Oracle doesn't have to wait for you to give it the data -- it's all there for the taking. And I'm sure the Oracle License Management Services (LMS) audit team is building a cloud audit practice; at least, that's what I would do if I were them.

The second reason Oracle will become more difficult to do business with is brain drain. Lots of folks have left Oracle to go to smaller, more nimble, cutting-edge companies. Look at the Salesforce sales teams: It's like an Oracle reunion over there. We've also seen this with the LMS audit team. Lots of people have left, work is being moved to low-cost, off-shore centers and the leaders who remain don't have the customer focus they once did.

Oracle helps repatriate all the cash held overseas by U.S. companies. This one is completely different, and it revolves around corporate taxes. Oracle Co-CEO Safra Catz recently accepted a spot on Donald Trump's presidential transition team, and many people asked why. Again, look in the rearview mirror and you'll see. Catz has long promoted the idea that the U.S. government should lower corporate income taxes so large companies like Oracle can repatriate hoards of cash they've built up overseas -- more than $1 trillion in total, with Oracle holding about $50 billion, according to estimates. My crystal ball tells me that this will happen in 2017. 

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This was last published in January 2017

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