Oracle has recently fallen short of Wall Street’s Cloud revenue expectations which has led to a decline in share price and an increase in pressure to push Cloud sales. Today, 85% of Oracle’s installed base have not even begun to migrate from on-premise to Cloud, and the majority of the 15% who have begun migrating have only completed a small portion. This could be a sign that Oracle’s value proposition around their Cloud solutions is not being as readily accepted as Oracle had hoped.
Whether customers aren’t seeing the value in Oracle’s Cloud solutions or are simply not ready to make the move, we are learning of more situations where Oracle is using creative tactics to influence (from Oracle’s perspective) or coerce (from a customer’s perspective) adoption of its Cloud solutions.
These are a few tactics to watch out for.
1. Audit Threats
If a customer cannot develop a business case for migrating to Oracle’s Cloud solutions, then Oracle will create one, and audits are one of the more common tactics we have seen effectively drive Cloud sales. In this scenario, sales reps will create fear and uncertainty in customer’s minds to the point the customer will accept any solution to avoid facing an audit and the possible millions in unbudgeted noncompliance fees that may come with it.
Once the customer feels the pressure of a looming audit, the sales rep will offer a solution for making the audit go away — one that includes a sizeable Cloud commitment, even if the customer only has on-premise solutions.
2. Lessening Support for Specific Hardware
In 2014, Oracle acquired MICROS Systems, Inc., a provider of hardware solutions and point-of-sale (POS) systems to the hospitality and retail Industries. Prior to the acquisition, the Executive Vice President for Oracle Global Business Units, Bob Weiler, announced Oracle’s commitment to “protect and enhance customer investments in MICROS solutions,” and their plan for “MICROS’ management and employees to form a dedicated business within Oracle to maintain their focus on serving customers.”
Fast forward three years after the deal was inked and customers who purchased the RES 3700 systems from MICROS are far from satisfied with Oracle.
Poor Support Leads to Class Action Lawsuit
Florida-based A&E Adventures filed a complaint against Oracle last month regarding the poor support for RES 3700 systems and the case was moved to federal court in early March. While this lawsuit has not gotten the same amount of press as Oracle v. Google, it could be more meaningful to current Oracle customers.
More than simply neglecting RES 3700 owners, Oracle is being accused of actively and purposefully engaging in a scheme to force the owners of the POS hardware to switch to Oracle’s Cloud-based Simphony system as a means of increasing its Cloud subscription revenue.
The software conglomerate also took steps to prevent A&E Adventures from receiving services from Postec, a third-party they hired to repair its systems after Oracle’s failed attempts to do so. Oracle allegedly confiscated A&E Adventure’s “Red Key”, a USB drive purchased from MICROS that contains license code to enable regular upgrades.
In summary, the complaint accused Oracle of:
- Deficient services and software that has continuously malfunctioned since Oracle’s involvement
- Loss of revenue resulting from Oracle’s failure to correct malfunctions and the work Oracle did perform that crashed the system
- Breach of contract to adequately service the POS hardware
- Interfering with A&E Adventures’ business relationship with Postec
It will be interesting to see how this case proceeds and if it even reaches a courtroom or gets settled out of court. Unfortunately for Oracle customers, based on our experience and feedback we hear in the marketplace, this type of behavior to drive Cloud deals is not out of character.
3. Package Cloud with On-Premise Purchase
Like what you may have experienced with your cable provider, Oracle is offering packaged deals to their customers for incremental growth purchases. For years, cable operators have offered far greater pricing if you purchase a bundle that includes cable, a landline phone, and internet. If you remove one item from the bundle, the price can increase substantially. Therefore, many customers who want cable and internet but do not want a landline phone end up paying for one because the bundled package is less expensive than purchasing a la carte.
Oracle has borrowed this play for on-premise customers who just want to purchase additional licenses to account for growth. Oracle will bundle in a Cloud purchase, or Universal Cloud Credits that can be utilized on any type of Oracle Cloud service, with the incremental on-premise license purchase. The bundle will be priced much more favorably than buying just the on-premise licenses alone. This is similar to the previous tactic of audit threats, except here the sales opportunity is being initiated by the customer.
What This Means for Customers
All enterprise vendors deploy sales tactics that incentivize customers to invest more into the relationship, but Oracle’s tactics seem particularly aggressive as the pressure to drive Cloud sales intensifies.
These examples suggest that rather than drawing customers to their Cloud solutions with attractive benefits, Oracle may create situations that negatively impact customers to push them away from on-premise options (or leave them with no viable option but to migrate to the Cloud). Oracle users who have not yet migrated to the Cloud should fully anticipate Oracle’s creative sales tactics and consider the driving forces behind them in any upcoming negotiations.