The United States’ Lawsuit Against Oracle Could Impact Your Future Software Negotiations

We’ve all heard software reps blame “revenue recognition” and “Sarbanes-Oxley” as an excuse for not giving an extra discount or contractual concession. IT sourcing professionals may now hear “GSA Rules” and the “False Claims Act” cited as similar justification: “We didn’t give that concession to the government, so we can’t give it to you.” Could that be the worrying unintended consequence of the Justice Department’s action against Oracle: http:/searchoracle.techtarget.com/news/2240019712/US-government-sues-Oracle-for-tens-of-millions-of-dollars?

I can’t comment on the details of the Oracle case, but I’m sure it is complex and two-sided. For instance, I’ve helped clients negotiate reasonable compromises with Oracle to handle special circumstances that won’t apply to many other organizations. These may have involved an extra discretionary discount, if Oracle didn’t have a programmatic way to handle the exception. I wouldn’t expect to get the same concession or discount for another client to whom those special circumstances didn’t apply. For example, this report describes one issue that is particularly important to public sector agencies, but whose impact varies widely: Do Your Software Contracts Permit External Use?

My concern is that this lawsuit could prevent business customers from getting vital licensing concessions if earlier government buyers have failed to address the same issues themselves. The cost to the vendor of an otherwise reasonable compromise could be prohibitive, since it might now include the cost of granting the same thing retrospectively to all the government contracts too. This makes it even more important for public sector IT procurement professionals to not let the "favored customer" clause stop them from getting the best possible advice to help them negotiate their own solutions to the increasingly complex licensing problems such as external use.

Bottom line: IT sourcing professionals should get ready to deal with this objection from sales reps.