Put your money where your Oracle use is

In today’s fast changing world, it’s no secret that only those who adapt the quickest will succeed. A company’s success is driven by smart investments and a consistent modernization strategy. But do you know how to get there? Most often companies start by looking at their spends and trying to identify how to save costs. Where the journey often stops is where the real success should begin: saving money to make more money – you can invest your savings to grow the success of your business.

Think outside the box

Thinking about how you can optimize your budgets is a great first step. In this first article we’ll help you understand how you can save costs. Stay tuned to learn more about how to best invest your savings to stay ahead of your competition.

Preparation is key

Ideally, whenever you make a purchase, you want to have a well-designed plan that will cover your immediate needs, as well as your longer-term needs. In reality, that is not always the case and you might be faced with situations where you actually have to look for ways to optimize your environment. Buying software licenses is no different than any other purchase. It can, however, come with different options and other aspects you need to keep in mind.

Take Oracle for example:

When you’re entering into a on-premise license contract with Oracle, you’re not only paying for the licenses, but also for support. The support fees are calculated at 22% of the net license fee. For example: you’re buying licenses for $1M. In this case the support fees equal $220K. As per Oracle’s standard support policies, that amount is going up 4% every year. The first year you’re paying $220K, the year after is $220K + 4% and so on. Your support fee goes up year-over-year, even if your demands don’t change. In addition, you do not receive any additional benefits for this uplift.

At the same time, you can find yourself in the situation where your needs do change over time. Perhaps initially you thought that you would use functionality ABC in quantity XYZ, but as time went on, your requirements changed. In this scenario, you might be faced with the situation where you’re putting licenses on the shelf (licenses that you’re not using). However, because you bought all licenses in a single order (identified in one CSI), the moment you want to terminate the unused licenses, you are confronted with Oracle’s repricing policy. The result is that you’ll pay the same fees for the subset of licenses you would like to keep under support, compared to the fees you would pay if you renewed the support for all of these licenses as part of this order. Conclusion: you continue to pay the same fees, year-over-year.

You definitely want to take this into account before entering into a long-term contract and make sure that you’re purchasing the right amounts for your current and future needs. But what if you’re already in a contract with Oracle? In this case, you can look at how you can optimize your current Oracle usage and spend.

How can you optimize your Oracle usage and save costs?

It is really important to think ahead and have a clear overview of your Oracle licensing situation. Achieving cost savings might be your final goal, but in order to reach it, there are a few steps you need to take.

When you’re thinking about reducing the 4% uplift (support indexation) fees, the first thing you need to know is the renewal date. Preparing at least 3 months in advance is recommended. Example: if you purchased licenses on May 31st, then in the February-March timeframe you might want to look into what you can do to reduce the support costs. It usually comes down to understanding your current requirements and future needs and finding the balance - this to make sure you pay only for what you need.

The starting point in any strategy is understanding your current situation. Do you think you might have shelfware licenses? Start by looking at what you’re actually using today and compare that with your current available licenses. Are there programs or functionalities that you don’t use anymore, but continue to pay for? That is shelfware. Based on these findings, you can build an optimization strategy both for short and long terms.

How much can you save?

Once you’ve realized you can optimize your Oracle license usage, the next question that might come to mind is how much cost can I actually save? That depends on every company’s specific situation. We can help you achieve at least the 4% indexation in cost savings. However, depending on how many licenses there are on the shelf and their associated support fees, cost savings can vary between 4% and 60-70% of the total spend.

When should you start to prepare?

If you don’t have a clear view of your actual use, the moment to start preparing is now. Everything really starts with you understanding a) what you’re entitled to make use of and b) what your current usage is. This is to determine the shelfware position and the strategy that you need to follow to dispose of the support fees for these licenses.

If you already have clarity and insight into your current situation, then the strategy to achieve cost savings can be built based on the usage numbers that are already known.

What do you need to take into account?

We could not emphasize enough the importance of having a clear overview of your current spend and future requirements. By knowing what you’re entitled to use, you can determine your shelfware position. For example, a while back you purchased 50 licenses, but you’re currently using only 20 of them. That means your current usage is 20 and you have 30 licenses on the shelf. However, you also want to understand what your future demand looks like. What if next year you’ll need 30 licenses? In this case, from the existing 50 licenses, you’d want to keep 30 (current use & future requirements) and dispose of the support fees for the other 20 licenses. That way you avoid finding yourself in the situation where in a year, you need to purchase additional licenses.

To sum it up, in order to make an informed decision regarding what licenses to dispose of and what cost savings you can achieve, you need to understand your current situation (entitlements & usage) as well as the future demand (1-2 years ahead).

How can we help you?

Through our Oracle Advisory services, we support you in achieving a complete and accurate view of your actual license entitlement and your actual deployment and use of Oracle software. This baseline is the basis to define a strategy that you should follow to optimize your Oracle landscape and achieve cost savings.

In 95% of cases, we can ensure that we can help at least dispose of the 4% uplift that Oracle applies year-over-year. But, we may be able to achieve higher cost savings with a healthy ecosystem.