BDP International is saving hundreds of thousands of dollars a year in maintenance costs for its Oracle database software after switching to a third-party vendor that many CIOs are also turning to trim their support bills. The logistics company’s decision followed close scrutiny of its existing contract with Oracle, as well as the backing of the CIO and the rest of the C-suite, says Jason Bullock, BDP's executive director, IT Global Infrastructure and Support.
“We took the money that we had budgeted for Oracle support and were able to leverage that to help us build new customer-focused applications to keep our existing clients happy and attract new customers," Bullock says.
CIOs, perennially under pressure to do more with essentially static budgets, have long been chafing over paying Oracle, SAP, Microsoft and IBM for maintenance for what they say are largely incremental software updates and help-desk services. "Many CIOs are desperate to reduce the amount of maintenance they pay to big software companies, which they regard as over-priced for the value they deliver," says Duncan Jones, a Forrester Research analyst who researches vendor management issues.
Rimini Street paved with cost savings for CIOs
BDP, along with 1,270 Oracle and SAP customers, have found solace in Rimini Street, which offers software support for between 50 percent and 60 percent what the incumbents charge. The startup has helped customers such as paint provider Valspar, Dean Foods and the American Cancer Society significantly reduce support costs.
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When Bullock joined BDP in 2012 he assumed responsibility for the company's database software, which fed data to a critical logistics application that helps customers track goods. But after speaking with the IT staff and assessing BDP's Oracle contract, Bullock questioned whether he needed to keep paying Oracle $650,000 for help resolving support issues. The company was no longer making significant changes to the back-end development of its customer-facing logistics apps, called BDP Smart and BDP Smart Mobile, which had matured enough to essentially require nothing but feature updates on the front-end.
Bullock discovered that he had inherited a vexing Oracle contract. Soon after conducting routine performance tuning at BDP in 2011, Oracle sent BDP a bill and a notice that the company was using more software than it paid for. Bullock, who learned of the sequence of events from his staff and by reviewing documents, says that Oracle was counting database consumption for developer tests and quality assurance that shouldn't have counted as software running in production, per the contract. "Oracle did not make a whole lot of friends at the executive level when they did an audit in disguise and they presented us with a discrepancy and a bill," Bullock says. "Folks here didn't know that they can push back [against Oracle] on that."
But Bullock did push back. In June 2011, BDP eventually settled up with Oracle by signing an Oracle Unlimited License Agreement (ULA) to database software, for which the company was paying $3.3 million over three years to consume as much software as it desired. “It’s a pretty good deal if you’re a heavy Oracle shop and you plan to stay that way," he says. But that wasn't the case for BDP.
Soured by the "burnt bridges" feeling of the Oracle experience, Bullock in 2013 began strategizing with new CIO Angela Yochem how to move forward with the company's data management strategy. They elected to support new applications with MongoDB, PostegresSQL, MySQL and Microsoft SQL Server databases. So when Oracle notified BDP that it's ULA was coming up for renewal in June and began trying to engage with its customers Bullock had already connected with Rimini Street, which had promised to cut his annual Oracle database software costs to $320,000.
When the Oracle sales team came in to meet, Bullock, who had pored over the existing contract, asked them point blank if BDP technically owned the software at the end of the ULA. "You could hear a pin drop," he recalls. But they ultimately said BDP did indeed own the rights to the software license. Since allowing the ULA to lapse in June 2014, BDP hasn’t paid Oracle a dime for database software or support, Bullock says. (Oracle did not respond to our request for comment.)
Some CIOs seek succor in Oracle’s cloud
Jones, the Forrester Research analyst, says that in addition to seeking financial relief third-party software providers such as Rimini Street and Spinnaker Support, customers have begun persuading Oracle to drop its maintenance charges in return for some investment in its SaaS offerings. The perception among CIOs is that Oracle is a solid, if not exceptional, technology provider. As a result, some CIOs are willing to make the transition to Oracle's cloud solutions.
"Oracle is desperate to get traction on those, and some of them are pretty good," Jones says. "If a CIO is willing to renew the Oracle relationship and can steer clear of the duffers among the portfolio then they can switch their cost stream from valueless support to something in marketing or customer service that will benefit the business."
Oracle meanwhile has tried to stem the exodus of customers paying support with litigation since 2010, winning some decisions along the way. It's forced Rimini Street to modify the way it serves customers, including barring it from storing copies of customers' software on its own servers. In October, a Nevada federal court judge awarded Oracle a $50 million copyright infringement judgment. Yet it's thus far fallen short of winning the injunction it seeks to prevent Rimini Street from operating.
From a financial perspective, it's unclear how much impact Rimini Street has had on Oracle, which regularly reaps a 90-percent-plus profit margin from its software updates and support business. For the fiscal year 2015, Oracle reported that software license updates and support accounted for $18.8 billion of its $29.4 billion total software sales. As recently as the December quarter, updates and support comprised 52 percent of Oracle's revenues.