Oracle Contract Negotiation – Case Study: How an Oil & Gas Giant Cut $3.2M in Oracle Support Costs
Oracle Contract Negotiation – Case Study: How an Oil & Gas Giant Cut $3.2M in Oracle Support Costs
A major oil & gas corporation in the Middle East was struggling with escalating Oracle support fees that ate into its IT budget. By taking a proactive stance at support renewal time, the company negotiated significant concessions from Oracle.
Through license optimization and strategic timing, the firm reduced its annual Oracle support costs by $3.2 million (around 25%) while retaining full support on critical systems. This freed up budget for innovation without compromising Oracle coverage.
Client Background
- Industry & Region: Energy (Oil & Gas), Middle East.
- Oracle Footprint: Hundreds of Oracle Database licenses and Oracle E-Business Suite modules support exploration, production, and finance operations. Annual Oracle support bills were in the tens of millions of dollars, with ~22% of license value per year plus annual uplifts. Recent low oil prices and cost-cutting mandates put pressure on IT to rein in maintenance expenses.
Challenge
- Rising Support Costs: Oracle’s support fees were growing steadily (with yearly increases of 7–8%) and consuming a significant portion of the IT budget. The company was paying support on many Oracle products that were underutilized or no longer needed (“shelfware”). With a major support renewal looming, the status quo – ever-increasing costs for diminishing returns – was unacceptable to the CIO and CFO.
- Strict Vendor Policies: Oracle historically refuses to discount support and imposes policies (like Matching Service Levels and repricing) that make reducing support spend tricky. Dropping some licenses arbitrarily would trigger Oracle to reprice remaining support at higher rates, eroding any savings. The challenge was achieving real reductions without triggering Oracle’s punitive repricing.
- No Service Disruption: As a critical infrastructure operator, the firm relied on Oracle’s support for key systems (databases controlling pipelines, ERP for financials). Any negotiation had to maintain support coverage and quality for these mission-critical environments. The goal was to save money and stay safe, cutting costs without risking operations.
Approach
- License & Usage Audit: The IT asset management team performed a thorough review of all Oracle licenses versus actual usage. They identified numerous instances of shelfware – databases or modules licensed and on support, but not actively used. For example, extra database options (Partitioning, Advanced Security) were enabled on paper but not deployed in production. This analysis quantified how much support spending brought little or no value.
- Strategic Support Cuts: Using the audit data, the company decided to terminate support for entire clusters of unused licenses. To avoid Oracle’s repricing trap, they dropped entire product categories at once (e.g., all licenses of a certain unused module), so nothing remained in that category to be re-priced. By coordinating these cancellations with the renewal date, Oracle was limited in adjusting discounts. This immediately removed approximately 15% of support line items, resulting in approximately $1.5 million per year in savings, with no impact on operations.
- Negotiating a Cap & Bundle: For the remaining support, the company entered negotiations well in advance of the renewal. Using Oracle’s quarter-end pressure to its advantage, the company pushed for a cap on support fees. In the end, Oracle agreed to freeze support price increases for two years and even gave a one-time discount on base fees in exchange for a three-year renewal commitment. Additionally, the company consolidated multiple support contracts into a single one, which earned a better volume discount from Oracle.
- Leveraging Alternatives: The company subtly communicated that it was evaluating third-party support providers for some non-critical systems. The credible threat of moving maintenance off Oracle put additional pressure on Oracle to be flexible. Ultimately, Oracle’s improved offer convinced the firm to keep Oracle support across the board – but only after proving it was willing to explore alternatives.
Outcome & Results
- Lower Costs & Price Freeze: The support renewal deal cut costs by $3.2 million per year (approximately 25%) and even froze any Oracle support price increases for the first two years. This unprecedented concession means the support budget will remain flat in the near term, a major win for the finance team. Over three years, that’s almost $10M back to the bottom line.
- No Impact on Operations: All mission-critical Oracle systems remain fully supported by Oracle. The cost optimizations were achieved with zero degradation in support quality or coverage. Users noticed no difference – except that IT had more budget available for new projects.
- Optimized License Portfolio: The exercise resulted in a leaner Oracle footprint under support – every supported license now has a justified purpose. Unused licenses were taken off support (shelved) or set aside for future use without incurring fees. This cleanup not only cuts costs now but also reduces waste in future years. The company established governance to regularly review support versus usage, ensuring costs don’t creep up again.
Key Takeaways
- Identify & Eliminate Shelfware: Regularly audit what you’re paying support on. This oil & gas firm identified many unused licenses and removed them from support, resulting in a significant win with no impact on users.
- Drop Entire Products to Avoid Repricing: To minimize support, drop entire product sets rather than subsets. This avoids Oracle’s policy of raising prices on what remains – better to cancel 100% of an unused module’s licenses than 50% and lose your discount on the rest.
- Negotiate Timing & Terms: Engage Oracle ahead of renewal and utilize their quarter or year-end drive to your advantage. This company secured a price freeze and discount by aligning with Oracle’s fiscal priorities and committing to a multi-year term.
- Consider Third-Party Leverage: Although you may not be able to switch, having the option on the table can motivate Oracle to offer concessions. Let Oracle know you’re evaluating alternatives for less critical systems if costs aren’t reduced.
- Preserve Core Support: Throughout cost-cutting, ensure critical systems remain well-supported. The goal is to save money and stay safe. With smart targeting of cuts and negotiated terms, this firm kept essential support intact while still saving millions.
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