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Oracle accused of coercing customers into cloud migrations

Google Cloud CEO named as a defendant in a German firm's third attempt to bring Oracle to court

A view of Oracle's office building in Silicon Valley, California

Oracle is being sued for allegedly inflating cloud revenues and resorting to "systematically coercing and bribing" existing customers into cloud migrations.

This is according to a 164-page complaint filed to a Federal District Court in California by German-based Union Asset Management AG.

It's the third time that the company has sort to challenge Oracle in US courts having failed to get beyond the first hurdle in 2018 and 2019.

The report names founder Larry Ellison, CEO Safra Catz, former CEO, the late Mark Hurd, and claims that its top executives were "highly motivated to misleadingly inflate Oracle's Cloud revenues through the use of engineered deals by virtue of the company's compensation plan". 

The documents also name Oracle's former cloud boss, now Google Cloud CEO, Thomas Kurian as a defendant.

In the court filings, it states that Oracle employed a strategy known as Audit, Bargain, Close that it used to coerce cloud sales. With this Oracle would install its on-premise software in its existing client's ecosystems with preferences automatically enabled, which, according to the filing, would cause the customer to unknowingly exceed the limits of its license.

"After the customer fell into this trap, Oracle would audit the on-premises customer for violations of its on-premises software license," the filings said. "When it found violations, Oracle would threaten to impose extremely large penalties. Oracle would then offer to reduce or eliminate those penalties if the customer agreed to accept a short-term cloud subscription that the customer neither desired nor intended to use."

The documents also quote a 2017 email from Kurain, sent while working at Oracle. In the email, he is critical of the interface for Oracle Human Capital Management Cloud, calling it a "disgrace".

"I continue to get extraordinary pressure from our two CEOs [Mark Hurd and Safra Catz] and LJE [Larry Ellison] himself that the UI is not tenable... the core product UI is awful. Until you all collectively accept the mess you have made and the need to move quickly we are talking past one another."

In June 2018 the tech giant changed the way it reported cloud revenues every quarter by only putting forward a combined figure for SaaS, PaaS and IaaS. IT Pro has approached Oracle for a response. 

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