Posted on 06/04/2002 8:30:11 PM PDT by ledzep75
update SACRAMENTO, Calif.--Tensions between Oracle and California officials investigating a controversial contract with the company flared on Tuesday, when an executive walked out of a hearing room after a state senator sharply criticized the company.
Ken Glueck, Oracle's vice president of government affairs, was in the audience during Tuesday's committee meeting, part of a state investigation into the controversial $95 million contract with Oracle. Glueck got up and left after state Sen. Steve Peace said he wanted Glueck--who on Monday had criticized the hearing process--to testify before the committee.
The hearings stem from a critical state auditors report issued in April that said the contract could cost California $41 million more than the state's existing contracts, rather than save millions of dollars, as Oracle maintains. The auditor's report also criticized the speed with which the deal was approved by the governor's office and other state agencies.
Glueck and Peace met up again in a hallway outside the committee room soon after and Peace continued to harangue Glueck about testifying. Glueck appeared not to respond to Peace and later refused to comment on the exchange. Glueck told reporters that he would appear before the committee if he received a formal request.
The clash follows a flurry of angry letters and press conferences in recent days between Oracle executives and committee chairman Assemblyman Dean Florez. After Oracle sent a formal complaint to Florez, blasting the way he was conducting the hearings, Florez fired off a letter to Oracle Chief Executive Larry Ellison characterizing the accusations as "utter nonsense" and "false." Oracle then had a hastily called press conference that criticized Florez's letter, and Florez in turn called his own press conference.
On Tuesday, Peace said Florez had the support of the committee and called Oracle's letter and press conference "the latest twist in Oracle's bizarre behavior" toward Florez.
Meanwhile, Debbie Leibrock, technology investment review unit chief for the California finance department, testified for a second time before the committee. She reiterated her earlier testimony that she had raised concerns about the contract with her boss, Finance Director Tim Gage, who was one of six officials to recommend the deal. She said she had questioned whether California would, as Oracle claimed, save more than $100 million during the six- to 10-year contract. Leibrock also said she worried that the state agencies signing the deal had not yet verified Oracle's estimates on the amount of software that would be needed to establish a statewide enterprise licensing agreement.
She said Tuesday that she had sent e-mail to Gage on May 30, 2001, recommending that the state wait on the contract, only to learn that Gage signed off on a recommendation to the governor's office the next day. May 31 also happens to be the end of Oracle's fiscal year.
"I was very surprised," she told the committee. "I was not expecting Tim to sign the (recommendation)."
She said Gage sent her e-mail that acknowledged that it had been unusual to sign off on such a large deal "on the fly."
Gage began his testimony under questioning by Florez by reiterating that he was concerned about the specifics of the contract. Gage said he signed off on the deal after a lengthy discussion with Barry Keene, who was then the director of the General Services Department.
Keene indicated that his department had looked at the numbers in the contract and was confident that the state could achieve significant cost-savings, despite concerns expressed by Gage's own staff, Gage testified.
After signing off on the deal, Gage was asked by Susan Kennedy, cabinet secretary to Gov. Gray Davis, what he thought of the deal, Gage said.
"I told her that Finance didn't do an independent review of the numbers and that I felt comfortable the state would yield significant savings from it," Gage testified.
He indicated that although the state Finance Department hadn't done an independent review of the numbers, that Keene had said the General Services Department had looked at the numbers.
In further questioning, Gage faced questions from legislators who wondered whether he thought he was performing as expected when he didn't verify the numbers in the contract for himself.
Critics of the contract have noted that Oracle has long been known for its aggressive sales tactics, even in the high-stakes, high-pressure world of corporate software sales. The state auditor criticized the state's negotiators who agreed to the six-year contract--unusually long in an industry with rapidly changing technology.
The audit also noted that state officials waived protection in the event Oracle lowered its prices, the purchase price didn't include software upgrades and the state purchased far more Oracle licenses than it had employees to use them.
Since the contract scandal broke, three state officials have resigned or been suspended and campaign donations from Oracle to the governor and other state officials have been returned.
Testimony from former California state auditor Kurt Sjoburg and current state auditor Elaine Howle is expected to move the hearings into the second phase of the investigation, which centers on the merits of the deal, Florez said. Oracle hired Sjoburg in January to draft an evaluation of the deal and to determine whether it would generate cost savings for the state, after a state senator sent a letter requesting the state audit.
Next week, the committee will hear testimony from state officials from Ohio, North Dakota, Montana and Toronto, where legislators are also worried that their Oracle contracts didn't live up to promised cost savings.
This phoney dog and pony show reminds me of the one where the Clintoon supposedly chastized Je$$e about what black rap singers were singing before the Clintoon became the first Black President.
Both were scripted right out of Follywood.
Yeah, who's ever seen an agressive sales organization before?
The audit also noted that state officials waived protection in the event Oracle lowered its prices, the purchase price didn't include software upgrades and the state purchased far more Oracle licenses than it had employees to use them.
1) You get better up front pricing for the software if you don't opt for a bunch of T's & C's. Oracle's pricing history shows it increases prices more often then it decreases them - so - it's better not to put a bunch of clauses into the contract that raises the initial price. This is a non-issue.
2) You pay for a perpetual use license. The annual support fees pay for all software upgrades. For instance, an organization may pay $100,000 for a database license of version 8i. This buys ownership of the 8i product perpetually. They then pay 22% annually for phone support and any upgrades that come out. So if they maintain their support payments, they would get the 9i version for free when it comes out. And 10i, and 11i etc.
3) If the software is to be used in a manner that allows user access by non-state employees (i.e. CA residents), those users need to be accounted for in the license. Otherwise, I could set up a company with 1 user, then give access to all of the users of another organization and only pay for that 1 user. If CA wanted pricing by CPU, they could avoid the per-user pricing quote and simply pay based on each CPU the software will be used on. Then, you can have as many users as you want accessing the system. This allows flexability for the purchasing organization to minimize the price they pay for the software.
Whoever wrote this article did no homework on software sales.
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