A head of a consulting firm that helps Oracle customers cut licensing deals with the enterprise software giant says that fallout around Oracle's recent earnings announcement could help clients out at the bargaining table.
"If Oracle is posting fantastic numbers and growth, they tend to play hardball," says Ed Ramirez, president of Software Licensing Consultants. "If earnings are weak, perception is weak, [and] that's good for end users and customers."
Oracle's third-quarter revenues, released last month, were up 21% on last year to US$5.3 billion (NZ$6.6 billion). On the surface, the numbers looked strong, but Oracle still fell slightly short of analysts' estimates and its stock dropped in the days after the announcement.
But Eliot Arlo Colon, president and chief operating officer of Miro Consulting, another Oracle licence consulting firm, doesn't go quite as far as Ramirez. "It provides notice to clients that there's a weakness with Oracle," he says. "It gets them excited that maybe there's a possibility for a bigger discount. I don't know if that will play to getting huge concessions from them. It's still a case-by-case basis."
For its part, Oracle downplayed the results and says investors can expect a stronger fourth quarter. During a conference call to discuss the results, Oracle president Charles Phillips said "a lot of people have annual buying cycles around our Q4. Customers think they're going to get a better deal if they wait until Q4."
But will they? The answer isn't clear-cut, according to Ramirez and Colon.
For example, while there might be a rush of discounting at the end of the fiscal year, it's difficult to predict how much, Ramirez says. "Everything is triggered by sales people not hitting their quota," he says. "In turn, their management doesn't hit their number. That is what triggers it — it's not necessarily that Oracle as a corporation says, 'We need to do this.' It's a trickle-up effect."
Ramirez, who has worked as an area sales manager at Oracle, adds that the company can make concessions to customers beyond discounts, such as on various terms and conditions.
Colon offers a different caution, saying that there's far more competition for discounts during such rush periods.
"It's becoming more public that Oracle only has so much bandwidth to process larger deals at the end of the year. The message coming from Oracle field reps now is, 'Don't wait until the end of May, because I won't be able to get you the aggressive discounts.'"
"Once one big deal closes, a sales team may have hit their number and [other customers] get kicked to the second tier," he added. It might be wiser, he said, to "be the first in line, have a good story and play to the weakness of Oracle, which is that they have so many people waiting until the end of the year."
Nailing down a huge influx of complicated licensing deals can be overwhelming, even for a company the size of Oracle, Colon says. "For the first time this year, I was seeing six-figure deals missing the quarter because there wasn't enough time. That never happened in the past."
However, Oracle's sales representatives on the whole have been hard bargainers recently, Ramirez says.
"With all the acquisitions [Oracle has made] a lot of times they realise, 'Where is the customer going to go? What are their options? Before, there was a lot more competition. That's the attitude. 'Where are you going to go? We've got you.'"
Colon agrees that Oracle's buying spree has changed the landscape, but from a different perspective. His firm is now seeing clients order nothing for several months, but then buying up a slew of products at once.
"I've never seen that take off as much as it has in the last six months," Colon says. "The positioning from Oracle from all these acquisitions is, 'Now is the time to bundle and get all these things together.'"
On the flip side, customers are being emboldened, he says. "I'm seeing people asking for higher discounts and an overall lower price because they're dealing with one vendor."