Look before you (Orac)leap – A guide to Oracle licensing | HCLTech

Look before you (Orac)leap – A guide to Oracle licensing
January 20, 2021

Among global OEMs, has one of the most complex licensing policies. It is essential that customers get appropriate advisory of the Oracle licensing policies while procuring Oracle on-premise licenses or cloud subscriptions. Here are some pointers on understanding Oracle licenses and subscriptions, possible pitfalls to look out for, and mitigate Oracle licensing risks.

Avoid Oracle licensing risks with a better understanding of Oracle licensing policies

On-Premises Technology Licenses

Technology licenses include Database, Enterprise Managers, and System Management, Application Server, Business Intelligence, Identity Management, Tools, Enterprise 2.0, Collaboration, Data Warehousing Products, and Integration Products. This has traditionally been the core line of business for Oracle. Considering that Oracle as a company evolved from there over the years, licensing complexities are also more on this front.

Oracle ’s technology products are primarily licensed using two metrics— Named User Plus and Processor. The Named User Plus metric is used in environments where users and/or devices can be easily identified and counted. The Processor metric is used in environments where users cannot be easily identified and counted. While purchasing licenses on the Processor metric, it is crucial to ascertain the hardware environment, as the number of licenses depends on the hardware vendor and type of processor used.

Customers usually do not have the visibility on whether they have the right options granted or management packs installed for their needs. This is when they run into trouble during Oracle License audits. Options and management packs require additional licensing and should not be activated unnecessarily.

Another common problem encountered is around virtualization. There are specific licensing rules when Oracle technology licenses are run on virtualized servers and non-compliance could generate a huge penalty.

On-Premises Oracle Application Licenses

Oracle application product lines include , Siebel, PeopleSoft, and JD Edwards. In addition to these horizontal applications, there are vertical Oracle applications that address the needs of specific industries such as retail, health sciences, financial services, and communications, etc. under respective global business units.

All application products are available under the following three licensing models— Component pricing, Custom Applications Suite pricing, and Enterprise pricing. We need a good understanding of these pricing models to advise customers on their purchasing decisions.

Component pricing is Oracle’s traditional a la carte pricing. It is a cost-effective model for the customer licensing one to a few Oracle products with a limited number of end-users. It has two basic categories of metrics— user-based and usage-based. The user-based metrics, count who is authorized to use the software. Common user-based license metrics include application user, employee, customer, and subscriber, etc. Usage-based metrics, count items the application processes or creates as an output such as Electronic Order Line, Expense Report, Customer Record, or $M Cost of Goods Sold.

The Custom Applications Suite (CAS) model provides customers and partners the ability to create custom bundles based on their user needs. CAS licensing is suitable for companies with specific user populations requiring access to all the applications in a bundle. For example, a company with 100 end users requiring access to financials, supply chain planning, procurement and logistics, can do with a CAS bundle of these modules. There is no need to buy 100 licenses for individual modules.

The Enterprise Applications license model allows customers to license the desired Oracle products for their entire organization without keeping track of specific user licenses, servers, or deployment locations. This model is ideal for large organizations as well as for businesses that find it difficult to keep track of licenses (e.g., applications are deployed over multiple geographies). The most common metric used here is ‘Enterprise $M in Revenue,’ i.e. one million US dollars in total revenue generated by the business in their fiscal year. For example, a company’s revenue is USD 500 million, the pricing for the module as per the Enterprise Price List will be multiplied by 500.

A very common pitfall in the Oracle E-Business Suite licensing is Oracle Enterprise Edition Database license, which is bundled free of cost. However, there is a fine print that many customers ignore. We need to note that, in case of any customization to the Oracle E-Business Suite program, the Oracle Enterprise Edition Database licenses become chargeable. Hence, it is mandatory to educate the customer on this aspect.

Oracle Cloud Subscriptions (IaaS, PaaS, and SaaS)

At present, Oracle offers three purchase models for IaaS and PaaS subscriptions, namely Pay-as-You-Go, Annual Universal Credits, and Bring Your Own License.

Pay-as-You-Go pricing allows customers to quickly provision services with no commitment and pay only for what is used. There is no upfront commitment and no minimum service period. The use of are metered hourly and charged only for the resources consumed.

With Universal Credits, the customer selects a monthly spending commitment, and can consume any IaaS and PaaS cloud service anytime, anywhere. Universal Credits provide the flexibility to switch services, regions, and datacenters without notifying Oracle, and the ability to consume all current and future IaaS and PaaS cloud solutions.

Pay As You Go (PAYG) pricing lets customers quickly provision services with no commitment, and they’re only charged for what they use. There’s no upfront commitment and no minimum service period. Any cloud infrastructure (IaaS) and platform (PaaS) services consumed are metered and billed based on that consumption. If, during the services period of your order, Oracle makes new IaaS and PaaS services available within your cloud services account, Oracle will notify you of any fees that would apply to their activation and use.

Annual Universal Credits enables customers to have the flexibility to use any Oracle Cloud Infrastructure and platform services at any time, in any region, to deliver faster time to market. Customers can commit to an amount of Oracle Annual Universal Credits that can be applied towards the future usage of eligible Oracle IaaS and PaaS cloud services. This payment option offers a significant savings across cloud services, combining cost reduction and a predictable monthly spend with a ramp up period as you on-board your workloads.

Bring your own license (BYOL) allows customers to apply their current on-premises Oracle software licenses to equivalent, highly automated Oracle PaaS services in the cloud. Licenses can be used for corresponding Oracle PaaS services for 100% workload compatibility and license mobility in Oracle cloud.

Source: Universal Credit Pricing FAQ | Oracle

Oracle also provides a cost estimator tool in their Cloud portal (cloud.oracle.com,) for Oracle IaaS/PaaS, to help figure out monthly usage and cost before customers commit to a subscription model. The cost estimate is automatically calculated based on the choice of Oracle Cloud service category, its service configurations, and each resource’s usage in the configuration. Customers must use this tool in consultation with Oracle/Oracle Cloud partners before deciding on Oracle IaaS and PaaS

For SaaS, Oracle offers Human Capital Management, Enterprise Resource Planning, Supply Chain Management, and many other applications, all managed, hosted, and supported by Oracle. SaaS Cloud subscriptions are generally offered as non-metered service, where the customers pay for a set number of users over the service period. Customers are billed upfront based on that committed quantity and the metric is normally Hosted Named User.

Customers evaluating Oracle cloud migration must negotiate the right upfront pricing and contract structure, else their risks in the cloud journey may not be any different from traditional, on-premises license risks. Though Cloud subscriptions are supposed to be on-demand, it is not always the case. Oracle would generally ask customers to contractually commit for multi-year terms. This needs to be negotiated well with Oracle, if not for higher discounts. Customers can request inclusion of the renewal price protection and removal of the auto renewal clause from the Cloud Services Agreement.

The Importance of Consideration and Collaboration

A thorough understanding of Oracle licensing policies and skillful upfront negotiation before signing up Ordering Documents and Agreements is the key to successful Oracle License/ Subscription management. The terms in the Ordering Document should be vetted and negotiated well. In the event of any inconsistencies between the terms of an order and the Oracle Master Agreement (OMA) or Transactional Oracle Master Agreement (TOMA), the order shall take precedence.

While evaluating an Oracle purchase, be it on premise or cloud, it is prudent to consult the Oracle partners who have adequate experience in dealing with Oracle on licensing matters, to avoid excess spending and at the same time, be compliant on Oracle licenses/subscriptions.

Get HCLTech Insights and Updates delivered to your inbox