Commercial Negotiations with Oracle – Oracle Fusion Cloud

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by | October 12, 2021


Over the last years, Oracle has been successful in transforming its own Oracle ERP on premise customers to its Oracle Fusion Cloud Service. In its journey to transform end-users to the cloud, Oracle is heavily competing (and rather successfully) to get SAP ERP customers to switch over to Oracle Fusion Cloud, and has been named by Gartner as a Leader

However, early adopters from Oracle’s Fusion Cloud Services have been already confronted with the first “compliance claims” associated to unlicensed use of Oracle Fusion Cloud Services. Many end-users thought “with the cloud, there are no compliance issues anymore;” but the reality is different.

In our previous articles we focused on how the actual license metrics of Oracle’s Fusion Cloud Services dictate the importance of setting up and monitoring your users and the most common compliance issues seen at Oracle Fusion Cloud customers. In this article we will focus on the different non-standard terms you can negotiate on with Oracle during your commercial negotiations.

Non-Standard Terms
As with almost any commercial negotiation with Oracle, there are – next to the pricing applied – several non-standard contractual terms that you can negotiate in your new Oracle Fusion Cloud agreement. You would typically think of these non-standard terms in order to protect your company from any unexpected costs and risks in the future.

This includes amongst others:

Pricehold
Fixed discounted fees for additional quantities of cloud subscription and/or additional cloud subscriptions to be obtained during (and after) the initial term of the cloud subscription (e.g.: due to additional users or additional cloud subscriptions required during or after the implementation phase). This provides you protection for future negotiations and cost increases.

Renewal Cap
This renewal cap ensures the renewal fees for the cloud subscriptions (that you may want to renew at the expiration date of your initial cloud agreement), will not increase by more than a certain fixed percentage. This provides you protection from future cost increases.

Shelving Rights
The right to shelf your on-premises licenses (without having the requirement to terminate the licenses) and to continue to keep support for your on-premises licenses (without any additional costs), enables you (especially during the migration period from your on-premises deployments to the Oracle Fusion Cloud) to perform a smooth transformation. This provides you a cost saving opportunity.

Rebalancing Rights
The right to rebalance the fees as paid for un-used cloud subscriptions to other cloud subscriptions (you may require going forward), without additional investments to be made. This provides you a cost saving opportunity and get more “value for money.”

Use Rights
You should think carefully about your “customer definition” to enable all the different legal entities (as they are now part of your organization but also in the future due to mergers or acquisitions) are entitled to make use of the different cloud services.

Data Center Region
Perform your due diligence on the actual data center region (EMEA, NAMER, etc.) from which your Fusion Cloud solution should be made available, considering your data security and data privacy requirements as well as Oracle’s ability to provision from a specific data center region.

Auto-Renewal
You would typically not want your contract to specify that you will automatically renew your cloud subscriptions. It’s best practice to make sure that each renewal is an informed business decision by your organization. In preparation for your renewal, it is recommended that you have a close look at the actual consumption of the different cloud services and associated (then current) subscriptions, to evaluate the best possible commercial scenario. Insight helps you avoid and save costs.

Target Application Response Time & Service Cloud Credit
By moving to a SaaS solution, you no longer have any direct influence on the actual performance and response times of your former (on premise) applications. You are depending on Oracle. In case a certain uptime or response time cannot be met, you would normally want to be compensated for this. Ask for a service credit in return if the agreed performance and response times cannot be met.

Successor Cloud Services
Oracle reserves the right to bundle or re-bundle specific cloud services as initially available into other or new cloud subscriptions. But what happens if you initially bought cloud subscription A, and after 1 year Oracle decides to no longer make this cloud subscription available? Always make sure that your agreement states that you are allowed to continue to make use of the newer cloud subscription, against the similar or lower discounted renewal rates.

Termination for Convenience or Chronic Unavailability
Transforming to the cloud is a big step for many end-user organizations. But what if the cloud service does not satisfy your requirements in the end? Or what if the cloud service is (for whatever reason) unavailable for a long time? Requesting a termination for convenience clause in your agreement may be helpful. Having such clause enables you to exit the Oracle Fusion Cloud Service when you want to.

Alternatively, you can request that Oracle can terminate a specific cloud subscription (if this cloud service is not available for a long time), demanding Oracle pay a refund (for the associated upfront paid fees) in case such situation occurs.

Flexible Use Terms
At the start of the transformation, your functional and technical administrators try to quantify the actual requirements to the best of their abilities. But it’s all new and who knows exactly what is required? What if the number of subscriptions bought is way more than required? You would want to include a clause in your agreement, allowing your company to reduce the quantity and usage of the cloud subscription by X%. Oracle would typically limit such reduction to be done only once per calendar year. The reduction of the quantity and usage of the cloud subscriptions should result in a proportional reduced cloud service fee, which helps you to save costs going forward.

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