When It Comes to Negotiating With Oracle, Go First
The world of Oracle is often like the seemingly bucolic suburban town depicted in Stranger Things: often, things are not what they seem and what’s right might be unusual in another context.
Recently, I had another conversation with Craig Guarente, CEO and Founder of Palisade Compliance, who I’ve interviewed frequently in the past for our Escape Hatch from Oracle Research mission. He gave me a great example of this type of unexpected aspect that comes with negotiating with Oracle. While in most cases, whether it’s in a court room or a marriage, it’s advisable to be the person who goes second in a negotiation, with Oracle, Guarente recommends going first.
What’s his reasoning behind this advice?
He told me that while going first in most negotiations means you lose leverage, with Oracle it is the opposite. Oracle begins every negotiation by putting forward prices for their products that are dramatically high (one could even say, artificially inflated). But what’s crucial to keep in mind is that Oracle almost never sells anything at it’s list price. So if Oracle approaches a business and offers to sell it a suite of products for $10 million, and then the business negotiates it down to $7 to $8 million, the business may feel like it got a win.
But this isn’t the case. Oracle’s strategy is to pump up their prices so customers feel like they’re getting a great value when Oracle inevitably lowers the costs.
By going first in negotiations and telling Oracle explicitly the limit of what they will pay for a given software portfolio, companies can actually save more money than they would otherwise. Guarente advised approaching Oracle by saying “we will pay $X for this product because that is the value of that software to our business.” This puts Oracle in the position of having to justify, explain, and prove whether their products will actually provide more value than that to the business. If Oracle can prove there’s more value, then companies can up the price of what they’re willing to pay.
This is a strategy companies can extend to other software vendors as well. The key thing to keep in mind is that almost all vendors inflate the price of their software and discounts in the 60-70% range are not especially unique — larger customers often get up to 95% discounts off the “list” price. So instead of having Oracle dictate the terms, go first in negotiations and put the onus on Oracle to show that their products will bring your business more than what you’re initially open to paying.
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