Many of you have heard stories or experienced first-hand the number of ways Oracle’s contracts can lead to vendor lock-in and ever-increasing support fees. One of the more creative methods Oracle has utilized is through the insertion of a contractual clause titled, “Total Support Stream.”
When and where you’ll find it
Generally, this clause and approach do not show up in an original licensing deal or in a completely new product purchase. Rather, it typically happens:
- When a customer wants to purchase additional licenses to account for growth, which may also include new products as part of the purchase
- When a customer wishes to co-term support from many Order Forms for the convenience of only having to make one support fee payment per year
- As part of a negotiated credit on a new purchase, where Oracle agrees to provide a credit for some previously purchased licenses as part of a larger new buy
- When sometimes converting from a traditional component licensing model to an Enterprise License Model (ELA) or Unlimited License Model (ULA).
The clause is typically buried in an Order Form which details the products, fees, and other terms associated with a transaction.
What obligation and impact do the clause impose?
While the clause itself may appear to the untrained eye to simply state the different support streams that exist, what it accomplishes in other parts of the Order Form is to bind ALL past, present, and potential future support streams together so that a customer cannot terminate support on any of the individual support streams, only on the entire Total Support Stream.
Additionally, maintaining uninterrupted support of the Total Support Stream is often a condition precedent for exercising other rights under the agreement, such as the ability to provide transition services and assign licenses to a divested entity, to assign licenses in the event of a merger or acquisition, to make additional purchases under any negotiated price hold protections, or to receive support renewal fee price protections.
The language itself has evolved over the years and may vary from contract to contract, but essentially it binds the following support streams as part of a new transaction:
- Any converted or replaced licenses
- Any restated licenses where support may have been previously cancelled
- All new support as part of the current transaction
- Any support for Oracle licenses by merged or acquired entities – this is forward looking
- Any support for licenses purchased in the future pursuant to a negotiated price hold in the current transaction.
This clause covers all bases (the past, present, and future) to ensure Oracle’s support streams never get reduced, whereas without this clause a customer can typically terminate support on an Order Form basis, provided they did not have additional quantities of the same products in a separate Order Form. In other words, a customer must terminate support on all its licensed quantities for a specific product.
The key takeaway is for customers to:
- Be aware of the ramifications of this type of clause
- Understand the risks and obligations you are taking
- Determine if the benefits outweigh the risks.
The most common complaint we hear from customers about Oracle’s contracts and policies is, “We didn’t know or understand the agreement,” and this typically occurs after they are forced to deal with a surprise situation that they failed to anticipate and now need to seek help to resolve. In some limited circumstances, failure to understand the contractual language and advise executive management of the potential risks prior to contract execution has led to employee termination.
As for removing or modifying the Total Support Stream clause or clauses that reference and tie in the Total Support Stream clause, this is something that needs to be accomplished at the time of negotiating the deal, not after it has been signed. Oracle remains very disciplined in not removing this language once proposed, but the ability to successfully remove or modify the language depends on a customer’s negotiation leverage and is determined on a case-by-case basis.
One challenge is that this language does not appear until a customer has the final paperwork in an Order Form, which is often submitted as a PDF document just days before the end of a quarter. There is a lot of pressure to close the deal by the quarter end both from Oracle and from the customer’s business and IT leaders.
Since a big part of the negotiation focus is on price, price protections, and other related commercial terms, this type of language often gets overlooked or brushed aside as not overly relevant. Oracle’s sales team will also provide high-pressure tactics and implore customers that they cannot change this language or will have to go through multiple approval cycles that will push the deal past the quarter, and therefore, whatever price and commercial concessions negotiated in the current deal will be lost.
However, depending on the size of a customer’s deal, their negotiation leverage, and willingness to walk away from a deal that does not address their reasonable requirements, customers who exercise due diligence in the agreement review cycle can be successful in negotiating modifications to some of these clauses that reference the Total Support Stream clause and give it its teeth.
To hear more about Oracle’s pricing, register for the complimentary webinar, “Sell & Deploy: Oracle’s Sales Strategy and Tactics,” on September 21st at 11:00 EDT.