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By | Gavin Clarke 23rd March 2015 18:54

Got a killer Microsoft or Oracle cloud deal? Start sweating

Big boys snare the unwary with too-good-to-be-true deals

Analysis Feeling pressured? A sense you’re being rushed into something you’re not sure about? Or, perhaps, you have a nagging feeling about that free gift you accepted. That sensation is your IT supplier pushing you into their cloud.

Oracle and Microsoft, two of the biggest names in corporate IT, have been left standing by the success of Amazon AWS and Salesforce. They are now making up for lost time, puffing to catch up as they build cloud-based versions of their applications sold under new subscription-based licenses.

And they are coming at you with all kinds of fantastic offers to make up the sales gap.

It's working: Oracle and Microsoft claim their cloud businesses are booming, or, at least, growing faster than their businesses. Well, growing.

Oracle last week reported a 33 per cent increase in total cloud revenue, to $527m for the three months to February 28 – that’s for Infrastructure, Platform and Software as a Service. Microsoft claimed commercial cloud revenue grew by 114 per cent in its three months to December 31, driven by Office 365, Azure and Dynamics CRM Online.

Beware. Remember the maxim that if something seems to good to be true, then it likely is? What’s emerging is a game where Microsoft and Oracle are incentivizing their sales people to go out and flog cloud.

Read the fine print or you will end up paying more than you bargained for. Sales staff from both companies are shifting cloud accounts in spades on command from the top, with incentive packages as the sweetener.

As The Reg reported here, Oracle has primed its sales team to sell anything vaguely cloudy. The firm's star performers are being awarded bonuses of between five and seven times their normal salaries if they exceed quotas in shovelling Larry Ellison’s aaS into customers' faces.

Richard Spithoven, a partner of Oracle licensing expert b.lay, told The Reg: “Big vendors like Oracle want to show stake holders they are capable of going with that product so to stimulate the sales force more incentive is given to sales.”

“It’s all cloud services that Oracle has now… that will probably change next year once Oracle evaluates what it needs to sell.”

What about that great uptake of Microsoft Office 365 you’ve been hearing about? Microsoft’s sales people have been throwing it into accounts, offering massive discounts. The worst-case scenario for a Microsoft sales person is if the customer comes to them with an order and budget that doesn’t include Office 365 because they don’t need it.

Microsoft has been countering that with the offer of bigger discounts on everything, on the understanding you accept some Office 365 in your final agreement. Many customers have been offered simply unbelievable pricing: $1.60-per-month bundle priced at $1.50, according to Microsoft licensing expert Paul DeGroot of Pica Communications.

“I know first hand of a case where a small customer got an extra 15 per cent off of everything else if they agreed to purchase some Office 365,” DeGroot told us. “In another case I was told… one customer agreed to add $2m for Office 365, which they had no intention of using, in exchange for a $6m overall discount.”

You should beware the gold-rush philosophy infecting Oracle and Microsoft sales people: cloud deals contain booby traps that blow up in your face. First, on Office 365, paying below the lower-than-published price might seem like a steal – but paying anything could mean you’ve just been had by Microsoft.

Big customers with a volume Enterprise Agreement may have Software Assurance. This program entitles you to receive the next version of a specific product for free if it’s delivered in the two- or three-year life cycle of your SA. In other words, check the small print: you might already qualify for Office 365.

One trap Microsoft customers who take Office 365 fall into is to accept Redmond’s cloud service without needing it: they risk paying for something they don’t actually use. The Office 365 meter starts running the second a contract begins.

EAs run for up to three years, but if you don’t start using Office 365 for two years, say, then you’ve just blown 60 to 70 per cent of your money.

DeGroot recounts how one customer accepted Office 365 for 15,000 users under a three-year contract. After three years and following early, unsuccessful tests, the customer is only now talking about a wider pilot. He reckoned the company had probably already spent $5m and was about to sign away another $5m on Office 365.

“Microsoft is coming at them with a pitch of: 'Of course you want to move to Office 365',” DeGroot said. “Lots of customers have heard of cloud and are thinking of moving to the cloud, even though they don’t understand it.”

Not just Microsoft - Oracle's at it too

Getting oversold on cloud has been happening in the Oracle world, too. How much cloud is Oracle throwing at customers? Spithoven knows of one unnamed customer who’d undergone an Oracle software audit and was found to have a “compliance issue” of 2.5m euros. In return for swallowing three years of Oracle cloud services, the software bill was cut to 200,000 euros.

What might seem like a great deal up front, or in the short term, contains hidden pain. Going cloud isn’t a case of easily changing platforms at the flip of a button: it’s an IT transformation project requiring profound strategic and detailed tactical action.

Failure to appreciate this means you can end up switching off the old Oracle licenses before you’re ready and then having to re-activate them – at the new prices.

The problem lies in knowing what apps and modules customers are running and which work with the 12c multi-tenant database that now runs Oracle’s cloud. The average customer runs between 600 and 800 apps and not every application will yet support Oracle’s database. If you’re running one of those apps you’re in trouble. Even more so if you’re running an old version of an Oracle app.

Spithoven has spent a lot of time working with Oracle customers who signed up to Oracle cloud services and realize too late they are running Oracle 8, 9, 10 or 11 and then need spend time and money getting on the newest versions that will run in the cloud. That means getting your apps working on Database 12c in the first place.

“There are benefits of going to the cloud but what you see are customers who move to cloud and then they get confronted with the fact their IT infrastructure is not ready,” Spithoven said. “It results in the fact the customer wants to use their cloud subscription but it’s only valid for X years, so they need to speed up the whole migration internally.”

Also, he notes, some are rushing into cloud and switching off their on-prem license with disastrous consequences for the IT budget.

“I’m seeing customers buying cloud who are not familiar with what’s available on premises, then moving to cloud and cancelling their on premises license,” he said. “Then they are confronted with the fact they want that functionality and the have to pay more.”

So, how do you avoid getting taken for a ride by sales people offering deals that are too good to be true?

Before you go even remotely near anything labelled “cloud” have an IT strategy that includes the cloud services you want to start using. Next, have a deployment roadmap. Specify which devices you will use or are entitled to, and find out what you need to get there and make it happen.

Also, be clear what it is you are and aren’t entitled to use under your existing license and also under the proposed new cloud license. Once you’ve signed, monitor your entitlements on a regular basis as vendors can, and do, change their terms. Also, monitor consumption of services, in order to stay honest and to have the facts at your fingertips when the inevitable audit does materialize.

Think that’s a no brainer?

DeGroot reckons 15 per cent of his clients can’t produce a good list of the Microsoft products they’ve used – and that’s a problem, because it gives Microsoft the upper hand during audits. He’s been working with one client for eight months to produce a list.

So, sure, swallow up the free stuff now – but you will pay later, and quite likely more than you’d reckoned on once the vendor’s audit team has called. When that happens, it’s no good complaining that you weren’t told or didn’t know.

“The important thing is for the end user to do their corporate due diligence before entering into a corporate agreement,” Spithoven says.

“Know exactly what you are dealing with.” ®

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