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Oracle contracts and pricing a 'challenge', says Gartner

While heaping praise on Big Red, analysts find room to criticize licensing, negotiations, and integration

Oracle's pricing models and contracts can be "challenging to navigate" and "frustrating for customers," according to a Gartner report that otherwise heaps praise on the omnipresent enterprise software company.

The global analyst has published its vendor rating report on Big Red, judging the Larry Ellison-founded company to have a broad and competitive technology portfolio, a vertically integrated and mostly self-developed platform, and a proven track record in revenue retention, growth, and profitability.

But elsewhere Gartner found cause for concern. "Oracle's pricing models and contracts can be challenging to navigate, which, coupled to Oracle's focus on increasing cloud product revenue, can be frustrating for customers who wish to only maintain their existing on-premises commitments," the report said.

It is impossible to tell what Gartner – which interviewed Oracle users for its research – might be alluding. But observers given to speculation might see a link between Gartner's finding and the alleged use of existing on-premises software licensing deals – coupled with the threat of audits – to strong-arm customers into Oracle's cloud services.

Oracle has denied the claim made by a group of investors led by the City of Sunrise Firefighters' Pension Fund in 2020, which alleged Oracle misled the community about sales of its cloud products by threatening customers with expensive software licensing audits unless they agreed to use Oracle's cloud software. The most recent amended complaint [PDF] in the case was filed in June last year.

Also last year, Oracle failed to block a legal case that alleged it inflated cloud revenues with dubious sales practices, although the vendor succeeded in reducing its scope.

Gartner additionally found that Oracle's variable pricing structure created "longtime issues that customers have found challenging" including "partitioning and support policies, which are often seen as archaic and restrictive."

Another bugbear focused on Java licensing. Big Red first introduced two licensing models for its commercial Java platform in April 2019 when it began charging license fees for previously free Java. This requires users to purchase an annual subscription for commercial Java Standard Edition (SE) products to receive patches and updates. In September 2021, when Oracle released Java 17, it began to offer a no-fee license with free quarterly updates for three years – but only for that iteration; not earlier releases such as Java 7, 8 and 11.

"A persistent area of complexity for customers is Oracle Java licensing, in which different models apply,” the report said.

Last month The Register heard how Oracle had begun to include Java in its software licensing audits for the first time.

For Gartner, Oracle is also expensive, particularly for on-premises and hosted instances.

"For on-premises products, list pricing is often high relative to competitors, and we have seen little change to on-premises list pricing. Overall for on-premises and other cloud services, numerous factors will affect the final discount offered — including timing, inclusion of strategic products, and the specific Oracle account team's targets."

But negotiating with Oracle is not always easy. "Some Oracle contract terms are truly non-negotiable, such as intellectual property rights and warranty," Gartner said.

"For other T&Cs, negotiability depends on the leverage a customer has at the time of contract negotiation. Leverage for negotiation rises with deal size, the strategic nature of the products and, to a lesser degree, customer industry.

"Feedback from Gartner clients indicate that sales teams are not authorized to offer contractual concessions. So, any contractual amendment can be time-consuming. Therefore, customers should take this into consideration in time-sensitive situations."

On the application side, Oracle Fusion software for ERP, finance, and HR in the cloud was difficult to integrate with other products, Gartner said.

Customers should also note that Oracle-supported integration with non-Oracle products tends to be limited. Further, even internally, integration with Oracle's own Industry Solutions and product roadmap alignment "should not always be assumed," the report said.

But overall, Gartner was positive about one of the world's largest and sometimes controversial business technology vendors. It rated Oracle as positive for products and services, technology, strategy, and corporate viability.

Oracle was offered the opportunity to respond to Gartner's report. ®

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