Oracle will lose out unless it changes its software licensing

In an open letter, Campaign for Clear Licensing highlights the risk to Oracle’s future earnings due to aggressive licensing

In an open letter, the Campaign for Clear Licensing (CCL) has highlighted the risk to Oracle’s future earnings if it doesn't change its aggressive licensing stance.

The letter attacked Oracle’s approach to measuring successful software licence sales.

"Customer satisfaction, relationship strength and strategic value should replace audit revenue as a key performance indicator," CCL stated in the open letter.

CCL also warned that Oracle's licence revenue could be threatened if organisations using Oracle software consider themselves at risk of being audited and charged for being under-licensed.

The campaign's open letter stated: "As more organisations mature in their governance processes, more will shy away from Oracle as an unnecessary burden to manage. Oracle needs to engineer its products and licence programmes to reduce unnecessary risk. The focus of control needs to be placed in the hands of the business, not developers."

Oracle needs to regain customer trust

CCL said Oracle was losing out because customers no longer trusted it. "Oracle is not being invited to participate in key business conversations because of mistrust. Oracle needs to step up conversations and provide clarity to regain trust," the open letter noted.

An Oracle wish list

  1. Strategic focus
    Customer satisfaction, relationship strength and strategic value should replace audit revenue as a key performance indicator.
  2. Audit clarity
    Oracle needs to be crystal clear with audit activity and adopt the Campaign for Clear Licensing code of conduct.
  3. One voice please
    Organisations want clarity over Oracle licence management from one voice. They don’t want to be passed between departments that don’t communicate with each other.
  4. Knowledge base
    Oracle needs to invest in a well-organised knowledge base to educate its customers.
  5. Re-engineer risk
    As more organisations mature in their governance processes, more will shy away from Oracle as an unnecessary burden to manage. Oracle needs to engineer its products and licence programmes to reduce unnecessary risk. The focus of control needs to be placed in the hands of the business, not developers.
  6. Software asset management evangelism
    Oracle needs to help educate its customers to assign appropriate resource for managing software and proactively assist with licensing training and management practices around Oracle software.
  7. Communicate
    Oracle is not being invited to participate in key business conversations because of mistrust. Oracle needs to step up conversations and provide clarity to regain trust.

Source: Campaign for Clear Licensing

CCL’s open letter listed seven key areas that Oracle needs to address (see side panel), including customer satisfaction, audit clarity and simpler communications with the company.

As Computer Weekly has previously reported, Oracle’s sales tactics are often regarded by buyers as aggressive.

Computer Weekly recently spoke to an organisation which faced the prospect of one of its sites being switched off due to a disagreement with Oracle over licence fees.

Oracle has previously been criticised over its virtualisation licensing. Oracle does not recognise the virtualisation software of any other supplier, which means businesses risk having to licence Oracle on every physical server the software could run on.

Some companies facing a massive Oracle bill have set up entire physical server sites just to run Oracle software, and so avoid the licence fee Oracle charges for running its software on VMware or other non-Oracle hypervisors.

Martin Thompson, founder of the Campaign for Clear Licensing, said: "In 2015, we want to see Oracle puts in some steps to listen to the voice of its customers."

Speaking previously to Computer Weekly, Thompson said: "Based on our research and conversations over the past six months, we have found that customers’ relationships with Oracle are hostile and filled with deep-rooted mistrust."

In a CCL survey of 100 Oracle customers, published in November 2014, 92% "disagreed" or "strongly disagreed" that communication from Oracle had been clear and straightforward.

Aggressive sales targets criticised

Forrester principal analyst Duncan Jones said the main cause of audit problems is a gap between the target Oracle has given its sales staff and the real underlying demand for Oracle products. 

"It is this gap, and the excessive pressure that Oracle places on sales teams to close it, that causes some reps to find creative ways to extract revenue from unwilling customers," he said.

Jones said many organisations are considering limiting the amount of Oracle they use. “Even if you end up renewing your commitment to Oracle's products, you'll be in a better negotiating position by having undertaken this review,” he added.

Jones said he often hears from software asset managers who complain that dealing with Oracle is difficult. "Now, I'm hearing that many real decision-makers, such as CIOs and their direct reports, are also reconsidering Oracle's place in their technology strategy."

Moving new projects to a non-Oracle platform is clearly easier than migrating existing software. "Threatening to direct new investment elsewhere will give you more leverage with Oracle's sales teams," he said.

According to Jones, one problem for Oracle is that it relies on anti-cloud policies to generate licence revenue, which makes the total cost of ownership of Oracle products much higher for organisations that want to harvest the full benefits of cloud. 

"If Oracle changes its core policies to compete better in the cloud market it switches off the revenue tap, because customers will be able to use cloud efficiency and utilisation to process increased Oracle workloads without increasing total core capacity," he concluded.

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