NET(net) advises all clients to strive to “lock down” every escalating cost of Oracle’s annual maintenance and support services by negotiating a maintenance freeze for as long as possible.
What is a maintenance freeze? It’s a provision in the contract to ensure that Oracle doesn’t increase the annual maintenance service and support costs year over year; and on a compounding basis.
Why is it needed? Across our experiences, Oracle often charges a 9% annual increase, which compounds year-over-year, and fundamentally Diminishes the Inclusive Value of the annual maintenance & support services Equation: the DIVE phenomenon).
A cost increase of course offers no extra value, but it compounds the ever-widening disconnect between the cost of support and the value received from support on the Oracle software.
After Oracle software is deployed and a customer stabilizes its production environment and becomes more efficient using the software, the actual need for support by the client goes down considerably. Oracle’s contention that it increases costs (the Value Gap) due to increasing labor costs is simply a silly argument; it’s all about showing ‘growth’ to Wall Street as their renewal rates are exceedingly high as customers have a difficult decision to make – to pay Oracle another year of support, to try to support with a third party or provide self-support, or to potentially risk a complicated and expensive switch of a vital infrastructural component.
Another reason why the labor cost argument from Oracle is silly? According to Oracle co-CEO, Safra Catz, Oracle’s maintenance service and support business “is basically 100% profit”. A third reason: Isn’t Oracle using its own technology to further digitalize and automate its business, which would result in lower people costs? A fourth reason: just look at your support logs, which generally dry up after major software initiatives mature. For those and other reasons, clients should seek a 60-month freeze on maintenance service and support fees – which means no annual increases for the first 5 years. It’s not commonly agreed to by Oracle, but clients can often get a 3 year freeze.
Einstein once said the most powerful force in the universe was that of compounded interest, and if you experience annual increases on your Oracle maintenance costs, you too will become a believer.
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