Topics in this Working Knowledge :Enterprise Agreements
Oracle has recently informed the General Services Administration (GSA) that it will remove all of its products from GSA Schedules as of Oct. 11, 2016. This means that no Oracle resellers can sell their products through GSA Schedule. Additionally, option periods on some agency contracts with Oracle may no longer be honored.
While this is not the first sign of trouble between the two parties, federal agencies are still grappling with the implications of Oracle’s bold move. Federal customers have expressed concern about what this unprecedented action means for their current contracts, including how to prevent a disruption in planned deployments and avoid cost increases.
Understanding the what, why, and how of the Oracle decision can help agencies plan for the strategic shift with services and budgets intact.
What led to this decision?
Oracle’s well-documented history with GSA has been precarious, as demonstrated by the company’s $200 million False Claims Act (FCA) settlement in 2011, which forced Oracle to end the practice of selling directly to government customers. In 2012, GSA canceled one of Oracle’s IT schedule contracts, further increasing hostility between the agency and the software giant.
Sources cite many reasons for Oracle’s current decision, including:
- The high administrative cost of working with GSA;
- Large risks imposed by FCA and the Schedule Terms & Conditions; and
- Oracle’s unwillingness to have resellers participate in the Transactional Data Reporting (TDR) program being implemented by GSA. TDR requires contractors to electronically report key procurement data including prices, quantity, and standard part number, which Oracle considered prohibitive.
While other vendors have cited similar complaints about GSA’s Schedule program, no major software company has yet to follow Oracle’s lead.
How will this affect new purchases of Oracle products, services, or maintenance?
After October 11, federal customers will no longer be able to purchase Oracle products, maintenance, or services via third-party resellers through any contract that was based on the GSA Schedule. Agencies can, however, make their Oracle purchases via contract channels that were not based on the GSA Schedule or through other government GWACs such as NASA SEWP.
How will this affect existing agency contracts?
Agencies who have existing agreements with resellers will likely need to find new contracting routes. Option periods for existing contracts may or may not be able to be executed (see below).
Will Unlimited License Agreements (ULAs) previously negotiated with Oracle be affected?
Most likely not. Federal agencies with ULAs should have an executed end-user ordering document, which is a contract signed by a reseller with terms set by Oracle, the reseller, and the agency. Regardless of Oracle’s shift, federal ULA customers should not see an impact to their current deployment of products and services. This should include any other negotiated aspects of the agency’s ULA, such as price-holds for add-on products or value-added services.
However, federal agencies with ULA agreements that have future payment obligations beyond Oct. 11 will need to work with their resellers and Oracle to find an appropriate mechanism, such as another GWAC, by which to make these payments.
Federal Oracle customers with previously awarded agreements should not expect a disruption in their deployments. They will simply need to resolve the payment mechanisms that are appropriate and legal, given that resellers will no longer be able to receive those payments through the GSA Schedule contracting channel.
What should my agency be doing to prevent a disruption in planned deployments or prevent cost increases?
It appears that Oracle intends to honor existing agreement pricing and terms, and they do not intend to break these agreements with customers. However, agencies should immediately develop a transition strategy.
Specifically, agencies should contact their current reseller(s) now to discuss the implications for their specific contracts. Concurrently, agencies must begin evaluating the best contract route to transition to (typically this will be a GWAC). Based on the size and complexity of contracts, agencies may need to discuss exercising maintenance payments directly with Oracle and ask if they will honor the pricing with a different reseller.
For those customers who are unable to move to a different GWAC, it is prudent to discuss the possibility of having Oracle grant a limited letter of supply to your reseller to fulfill contractual obligations through GSA Schedule.
Is this a good time to re-negotiate prices or Terms & Conditions?
Agencies that are nearing the end of their contract, or whose needs have changed since their last contract should consider engaging in market research discussions with Oracle. Oracle’s licensing and business models have evolved over the past 12 months, and opportunistic agencies have driven savings up to 30 percent by strategically optimizing their licensing models.
Censeo Consulting Group is the federal leader in supporting agency efforts to establish enterprise agreements with large software publishers. For more information about Censeo’s capabilities and additional Working Knowledge briefs, please visit: http://www.censeoconsulting.com/what-we-do/enterprise-agreements/