4 February 2020

ITAM Survey Uncovers More Damning Evidence Of Oracle's Predatory Audit Practices Designed To Drive Oracle Cloud Sales.

The ITAM Review recently published the results of its December 2019 survey of Oracle customers, asking for their first-hand experiences and whether Oracle employed predatory software...
United States Accounting and Audit
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The ITAM Review recently published the results of its December 2019 survey of Oracle customers, asking for their first-hand experiences and whether Oracle employed predatory software audit practices to coerce Oracle customers to buy Oracle cloud products.  According to the ITAM Review “the information gathered validates the case against Oracle suggesting they used improper tactics to falsify the success of their cloud products”.  ITAM asked its readers whether (1) they had ever experienced Oracle using software audits to coerce customers into buying cloud products; and (2) whether Oracle ever offer discounts on on-premises software products in exchange for a cloud purchase that the customer did not need or want.  The answers given by Oracle audit customers are a resounding yes.  Here are the key take-aways from the customer survey:

  • Anecdotes collected from ITAM Review readers “provide damning evidence of Oracle artificially inflating their cloud sales through dodgy deals and spurious audit tactics”.
  •  Oracle routinely used software audits or the threat of audits to force Oracle customers to buy Oracle cloud.
  •  Oracle customers rarely if ever used the cloud products they were forced to purchase.
  •  Oracle used the threat of audits on ULA customers to attempt to force these customers to renew the ULA rather than certifying off.
  • Customers believe Oracle Sales pushed cloud products because Oracle management financially incentivized them to do so.
  •  Many customers buying Oracle cloud to avoid or resolve an audit never used the product and cancelled after one year.
  •  ITAM concluded that “[i]nformation in our survey, from ITAM practitioners around the world, provides damning evidence to support Oracle artificially inflating cloud numbers to impress shareholders”.

Plaintiffs in the Sunrise Firefighters class action filed in the Northern District of California have until February 17, 2020 to file an amended Complaint.  It will be interesting to see whether Plaintiffs include in their amended pleading more specific anecdotes from Oracle customers like the ones detailed in the ITAM Review.  

Oracle customers who are under audit or under threat of audit should consider the following actions:

  •  Resist Oracle’s demands to have endless meetings and conference calls and instead keep everything in writing.  You can better protect yourself from Oracle’s overreaches if you make Oracle commit to its positions in writing, and can use this record against them when negotiating your audit or other resolution.
  •  Capitulating to Oracle’s threats may get you out of your audit sooner but may hurt you in the long run as Oracle may consider you an easy target for future forced sales and more software audits.  
  •  Limit the information provided to Oracle to only what is contractually necessary and no more than that.  Providing voluminous information to Oracle that is not contractually required, will not get you out of the audit sooner but will only result in the demand for increased licensing fees from Oracle and a negative impact to your negotiating position.
  •  Keep your IT staff under tight control and prohibit them from socializing and sharing information about your IT environment with Oracle Sales.  Less information is better and Oracle Sales will use these lunches and entertainment opportunities to extract information from your IT team, which will later be used against you.
  •  Review your Oracle contracts carefully and ensure you have assignment rights before acquiring other companies, and assess your risk of non-compliance if you do not.  Oracle appears to monitor the business news relating to its customers and an acquisition often may trigger an audit.
  •  Share any audit notice or inquiries from Oracle immediately with your in-house legal department and keep your in-house lawyers in the audit loop.  IT and procurement professionals should always involve their legal teams at the earliest opportunity.  
  •  Whether you have in-house counsel or not, you should retain outside legal counsel experienced in Oracle’s software audits at the earliest opportunity to help guide your response strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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