Oracle Contract Negotiation – Case Study: How an Insurer Saved 20% on Exadata Cloud@Customer
Oracle Contract Negotiation – Case Study: How an Insurer Saved 20% on Exadata Cloud@Customer
A leading insurance group in Latin America sought to modernize its database platform but had strict data residency requirements. Oracle’s Exadata Cloud@Customer (an on-premises cloud solution) was an ideal technical fit, but Oracle’s initial pricing was steep.
The insurer engaged in a shrewd Oracle negotiation and secured the Exadata Cloud@Customer deal at 20% below Oracle’s list price, with flexible terms for future growth.
The result enabled the company to establish a state-of-the-art database system on-premises within budget, aligning with both its performance needs and regulatory obligations.
Client Background
- Industry & Region: Insurance (Financial Services), Latin America.
- IT Context: The company operates large Oracle Database workloads for policy management and analytics. Due to regulations, sensitive customer data must remain on-premises, but the firm wanted cloud-like scalability and performance. Oracle’s Exadata Cloud@Customer (ExaC@C) – a cloud-managed Oracle database system running in the company’s data center – was under consideration to meet this need.
Challenge
- High Initial Cost: Oracle’s proposal for Exadata Cloud@Customer included a substantial up-front commitment. The recommended configuration (a half-rack Exadata system) came with a multi-year subscription cost that overshot the insurer’s IT budget by millions. Oracle’s pricing model also required committing to a fixed amount of database capacity (OCPUs) regardless of actual usage, raising concerns about overpaying for unused headroom.
- Vendor Lock-In Concerns: Choosing ExaC@C meant entrusting Oracle with critical on-prem infrastructure. The CIO sought contractual assurances in case the solution didn’t meet expectations, such as the ability to scale down or exit after a term. Still, Oracle’s standard contract included stiff penalties and automatic renewals.
- Timeline Pressure: The insurer needed to refresh aging hardware soon to ensure continuity. Oracle’s sales team leveraged this urgency and pushed to close the deal by quarter-end, adding pressure but also creating an opportunity for leverage.
Approach
- Right-Sizing & Options: The insurer pushed back on Oracle’s suggested configuration. Using performance data from current systems, they demonstrated that a smaller quarter-rack Exadata configuration would meet initial needs. They negotiated the option to scale up later with more nodes or capacity if required. This avoided buying a half-rack upfront “just in case,” saving a significant cost.
- Aggressive Pricing Negotiation: The procurement team, aware of Oracle’s discount benchmarks, targeted a 30% discount off list for the ExaC@C subscription. They timed negotiations for Oracle’s quarter-end. In the final deal, Oracle granted roughly a 25% discount on the annual service and included six months of free service credits, further reducing the effective cost. In return, the insurer agreed to a three-year term, but at the lower capacity level defined, rather than the oversized one Oracle had initially proposed.
- Flexible Terms Secured: The company focused on contract clauses to mitigate lock-in. They won the right to reduce or exit the service after the 3-year term without penalty, and a provision that any unused prepaid capacity could be rolled into Oracle’s public cloud if they ever migrated off ExaC@C. They also ensured Oracle would provide on-site migration and tuning assistance in the first year at no extra charge, to guarantee the solution delivered promised performance.
Outcome & Results
- On-Prem Cloud Deployed Within Budget: The insurer successfully deployed an Exadata Cloud@Customer quarter-rack in its data center, meeting all performance benchmarks in testing. Thanks to the negotiated discounts and credits, the total cost came in roughly 20% under Oracle’s initial quote, keeping the project within budget.
- High Performance Gains: Immediately after go-live, critical batch processes (like overnight policy calculations) ran nearly 5× faster than on the old hardware. The business experienced improved application responsiveness, validating the technology choice, while maintaining sensitive data on-premises to comply with regulations.
- Contractual Peace of Mind: The negotiated terms gave the insurer confidence. They can scale capacity on-demand as the business grows, but aren’t locked into paying for more than they need. At the end of three years, they have options: renew, expand, or exit without penalty. This flexibility made embracing Oracle’s offering much more palatable to the CIO and board.
- Strengthened Oracle Partnership: By reaching a win-win agreement, the relationship with Oracle remained positive. Oracle gained a high-profile customer reference for ExaC@C, and the insurer gained a modernized infrastructure with direct Oracle support. The insurer’s IT team and Oracle’s engineers now collaborate closely under the Cloud@Customer model, ensuring the platform is optimally tuned for the company’s workloads.
Key Takeaways
- Don’t Oversize Upfront: Insist on a configuration that matches current needs with room to grow. This insurer avoided overprovisioning by starting with a smaller Exadata system and adding capacity only if needed.
- Leverage Timing for Discounts: Align negotiations with Oracle’s quarter-end and year-end, and aim high for discounts. Significant reductions (20–30% off) are achievable for multi-year, strategic deals like Cloud@Customer – especially if Oracle can use your success as a reference.
- Negotiate Flexibility: Treat the contract as important as the tech. Push for terms that allow scaling down or exiting after the initial term, and that credit unused spend toward other Oracle services if plans change. This turns a potential lock-in into a more flexible arrangement.
- Utilize Vendor Resources: When adopting complex Oracle solutions, consider negotiating for expert assistance as part of the package. This insurer secured free migration and tuning assistance, which ensured a smooth implementation and held Oracle accountable for performance.
- Meet Both Sides’ Goals: By understanding Oracle’s desire for cloud revenue and the customer’s need for cost control, a mutually beneficial outcome can be achieved. The insurer secured a cutting-edge solution on its terms, and Oracle earned a satisfied customer willing to serve as a reference—a valuable bargaining chip in any negotiation.
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