Oracle Support Costs
- Annual Fee: Typically 22% of the net license cost.
- Tiered Pricing: Varies by product and service level.
- Mandatory for Updates: Required for software patches and updates.
- Renewal Fees: Incremental increases during renewals.
- Custom Support: Additional charges for tailored or extended services.
Oracle Support Costs
The landscape of Oracle support costs continues to evolve, presenting challenges and opportunities for organizations utilizing Oracle products.
Understanding these costs and available optimization strategies is crucial for effective IT budget management.
In this detailed analysis, we will break down Oracle’s current support cost structure, available support levels, and effective cost-reduction strategies that companies can adopt to make informed financial decisions.
Current Support Cost Structure
Oracle’s support cost structure is typically at 22% of the net license fee annually. This means that if an organization has $100,000 worth of Oracle licenses (after discounts), they are expected to pay $22,000 each year in support fees.
What initially seems like a manageable amount can quickly become a significant burden on IT budgets, especially as Oracle has consistently implemented an 8% year-over-year increase in these support fees.
Rising costs can catch many organizations off guard, eventually making Oracle’s support fees an unsustainable expense.
These incremental increases mean that accurately budgeting and planning for the future require more than accounting for annual licensing fees.
Support Levels and Their Impact
Oracle offers different levels of support that vary in cost, scope, and longevity.
These levels are Premier Support, Extended Support, and Sustaining Support, each offering distinct features and limitations.
1. Premier Support
Premier Support is the most complete support package Oracle offers. It includes:
- Major Product and Technology Releases: Access to new versions and updates.
- Technical Support Access: Available 24/7, essential for troubleshooting.
- Security Patches and Critical Updates: Ensures that your software remains protected against vulnerabilities.
- Tax, Legal, and Regulatory Updates: Important for organizations operating in heavily regulated industries.
- New Upgrade Scripts: Helps keep your infrastructure current.
- Third-Party Product Certifications: Ensures compatibility with other essential software.
This level of support is costly but offers full maintenance and compliance for your Oracle products.
2. Extended Support
When Premier Support ends, organizations may opt for Extended Support, which comes at a higher price. Here’s what Extended Support entails:
- Cost Increases: Oracle imposes an additional 10% increase on top of the initial support cost in the first year, followed by a 20% increase in subsequent years. This is in addition to the standard 8% annual increase.
- Continuity of Support: It maintains the same coverage as Premier Support but becomes increasingly more expensive.
Extended Support is typically used by companies that need more time to upgrade their software before it reaches the end of its lifecycle.
3. Sustaining Support
Sustaining Support is the last resort once Premier and Extended Support expire. It provides basic help but lacks critical features:
- No New Updates or Security Patches: This is a significant drawback, as systems become vulnerable.
- No Tax or Regulatory Updates: Creates compliance risks for companies.
- No New Upgrade Scripts or Third-Party Certifications: This makes future upgrades and compatibility more challenging.
Sustaining support is only viable for organizations that no longer rely on Oracle for active business-critical processes.
Read about Oracle ULA cost struture.
Cost Escalation Over Time
The impact of Oracle’s support cost increases is substantial due to the compounding effect. For example, an organization with an initial support cost of £401,500 can pay upwards of £1,231,773 after ten years due to these year-over-year increases.
This represents an increase of 206%, which can significantly strain IT budgets.
Furthermore, if an organization starts with licenses worth £1.8 million over a decade, it may pay more than £7.8 million in support fees alone.
This type of cost escalation makes organizations actively seek strategies for minimizing these expenses.
Cost Reduction Strategies
Fortunately, there are several methods organizations can consider to reduce Oracle support costs.
1. Third-Party Support Options
Switching to third-party support providers can lead to 50-70% savings on Oracle support costs.
However, a significant trade-off exists: moving to third-party support means forfeiting access to Oracle’s new software releases and innovations related to its latest technology stack.
Companies opting for this route need to weigh the benefits of reduced costs against the loss of cutting-edge software features.
2. Cloud Migration Benefits
Migrating to Oracle Cloud Infrastructure (OCI) can yield substantial savings on support fees. Oracle has introduced several incentives to encourage cloud adoption, including:
- Support Rewards Program: Organizations can receive a $0.25 reduction in support costs for every $1 spent on OCI. In some cases, this can reduce support costs to zero.
- Enterprise-Ready Support Included: When using OCI, support is often included at no additional charge, adding value to the migration.
Moving to the cloud provides cost reduction and better scalability and performance for many companies.
3. License Optimization
A significant number of Oracle licenses—estimated to be about 30%—are either unused or underutilized. Optimizing licensing can lead to direct cost savings. This involves:
- Reviewing Current Licensing: Identify areas where licenses are redundant.
- Identifying Unused Licenses: Return or terminate licenses that are no longer needed.
- Optimizing License Utilization: Reallocate licenses effectively within the organization to ensure no gaps or overlaps.
4. Negotiation Strategies
Negotiating with Oracle can also lead to significant savings. There are several tactics that organizations can use to mitigate rising costs:
- Support Renewal Caps: Commit to multi-year agreements with caps on support cost increases. Negotiating for a 0% or a very low increase cap can make costs predictable.
- Leverage Oracle Relationship: A good relationship with Oracle can help secure better terms. Customers making significant investments in Oracle’s ecosystem often find it easier to negotiate discounts.
- Cloud Transition Commitments: Large customers can leverage their cloud transition plans as a negotiation tool, particularly when migrating to Oracle’s cloud infrastructure or using Oracle Cloud-at-Customer solutions.
Read about Oracle license cost forecasting.
Future Considerations
Several trends are worth noting as the Oracle support landscape continues to evolve.
1. Market Driven Support (MDS)
In 2024, Oracle expanded its Market Driven Support (MDS) options, providing additional support for customers using specific versions of Oracle products, such as Oracle E-Business Suite (EBS). MDS offers:
- Extended Coverage: For certain EBS versions.
- Critical Fixes and Security Patches: Even after Premier and Extended Support have ended.
- Tax and Legal Updates: For companies transitioning systems, this is crucial for maintaining compliance.
2. Support Model Evolution
Oracle is adapting its support models to address the following needs:
- Integration of Cloud-Native Tools: Support increasingly includes tools tailored for cloud environments, making it easier to manage hybrid architectures.
- Cybersecurity Focus: With cyber threats rising, Oracle is incorporating more security-focused features within its support structure.
- Hybrid Environment Support: As companies adopt mixed infrastructure models (on-premises, cloud, and hybrid), Oracle offers more nuanced support to manage these complex environments.
Cost Management Best Practices
Successfully managing Oracle support costs is an ongoing process. Here are some best practices to help organizations manage their support expenditures.
1. Regular Audits
Conduct systematic audits to assess:
- Software Usage Patterns: Are all purchased licenses being used effectively?
- License Utilization: Ensure that licenses are allocated appropriately.
- Compliance Status: Identify any areas where the organization may be non-compliant.
- Support Contract Terms: Regularly review the fine print to identify opportunities for renegotiation.
2. Strategic Planning
Long-term strategic planning is key to effective cost management. This should include:
- Multi-Year Cost Projections: Understand where support costs are heading over the next 3-5 years.
- Reserves for Unexpected Expenses: Build a financial cushion for unexpected expenses, particularly if an audit reveals non-compliance.
- Regular Contract Reviews: Renegotiate whenever possible to secure more favorable terms.
- Usage Optimization Strategies: Develop ways to maximize license use and minimize waste.
FAQ: Oracle Support Costs
What is included in Oracle support costs?
Support costs cover software updates, patches, and technical assistance from Oracle.
How are annual Oracle support fees calculated?
They are generally 22% of the net software license cost and are charged annually.
Are support fees mandatory?
Support fees are optional, but businesses lose access to updates and support services without them.
Do Oracle support costs increase over time?
Yes, renewal fees often increase annually, typically by a small percentage.
What happens if support is discontinued?
Access to updates and Oracle’s technical support is revoked, though the software remains usable.
Can support costs be negotiated?
While Oracle rarely negotiates fees, discounts may be possible during the initial purchase or renewal.
Is support pricing the same across all products?
Support costs vary by product, service tier, and agreement terms.
Are custom support services available?
Oracle offers tailored support packages for additional fees based on specific business needs.
What is Oracle’s Lifetime Support Policy?
It provides three levels of support—Premier, Extended, and Sustaining—with varying costs and services.
Do cloud subscriptions include support?
Most Oracle cloud subscriptions bundle support services into the overall subscription fee.
Can third-party support reduce costs?
Yes, third-party providers often offer support at lower costs but may lack Oracle-specific updates.
What are the risks of not paying support fees?
Businesses risk software vulnerabilities, compatibility issues, and reduced performance without updates or patches.
How does Oracle charge for extended support?
Extended support fees are higher than Premier support and cover older software versions.
Is support cost linked to the total license fee?
Annual support fees are directly proportional to the total net license cost.
What tools help track Oracle support costs?
Oracle cost management tools or third-party software can track and optimize support-related expenses.
