An Introduction to Oracle Software Licensing

2 Nov 2016 | Data Center

What is Oracle licensing? Why will understanding it help in an Oracle audit?

Oracle have hundreds of different products on many different platforms but broadly split them into two categories – technology products and applications. Whilst there are many categories of technology products, for the purposes of this article Certero will be looking at the licensing implications of the 2 major Oracle software categories you are likely to be utilizing: Database and Middleware.

What are the Definitions in Oracle Licensing?

Oracle offers both term (sometimes referred to as subscription) and perpetual licenses for all its products. A perpetual license is a one-time license fee that allows continued use of the software program for as long as you comply with all terms of the license agreement. A term license is for a specific, limited period of time, during which you are allowed to access and use the software.

License metrics are selected carefully to reflect the functionality the product offers and the value the customer receives from utilizing that functionality. Essentially, a license metric determines how the software usage is being measured when Oracle licenses a product to a customer.

How is Oracle Software Licensed?

To develop your understanding of Oracle licensing, it is essential to understand how its technology products and applications are licensed differently.

Technology product licensing

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. All human users and non-human operated devices that are accessing the software must be licensed.
  • The Processor metric is used in environments where the software users cannot be easily identified and counted, like Internet-based applications. It is also used when it is more cost effective than Named User Plus licenses.

To calculate the number of required licenses, you need to multiply the total number of cores of the processor by a core processor licensing factor specified on the Oracle Processor Core Factor Table.

Application licensing

To provide flexibility and predictability, all application products are available under at least one of the following three licensing models:

  • Component pricing – user-based and usage-based metrics
  • Custom Applications Suite (CAS) pricing – custom suite user metric
  • Enterprise pricing – 5 license metrics

These enable customers, in a single order, to mix and match licenses that best fit their operating environment.

Types of Oracle Software Licensing Agreement

Oracle uses a combination of written agreements to license its software. The overarching license rights are described in the Oracle Master Agreement (OMA) – this was previously called the Oracle Licensing and Services Agreement (OLSA) – and the rights regarding specific products and services are described in the Ordering Document.

Specifically, the OMA is the agreement that details the standard rights granted, ownership, restrictions, warranties, disclaimers, confidentialities, etc., as it is relates to all Oracle products and services. The Ordering Document describes the specific products, types of licenses, number of users, level of support, and discounts (if any), a customer has ordered and will receive.

Oracle Master Agreements and Ordering Documents grant you specific rights to use Oracle software and receive any services you have ordered, and your rights are limited to those rights that are expressly granted. All other rights in the programs are reserved by Oracle.

Oracle Software License Reviews & Audits

Like all software vendors, Oracle needs to protect its IP, and so within your OMA you will find a specific clause relating to its right to audit. Typically, 45 days’ notice is the standard time you will be forewarned that Oracle intends to audit you.

The OMA gives Oracle “access to information” and normally they will request you run their scripts on your systems to ascertain your usage of their software. If they discover you are non-compliant, you will be asked to purchase extra licenses to remedy this. Typically, you will be charged for these without the discount you were given for your original purchases.

As well as an official Oracle audit though, Oracle will also request a license ‘review’. This is not the same as an audit and contractually, you are not obliged to cooperate. However, it would be wise to engage with Oracle to maintain a good working relationship.

Up until late 2016, Oracle had 2 internal divisions that dealt with audits and reviews: COLS and LMS.

  • COLS, or Compliance and Optimization License Services, is an extension of Oracle sales and typically conduct the reviews of your Oracle software usage (although technically this is an LMS remit) and can offer discounts, if you are found non-compliant.
  • LMS, or License Management Services, offers a more conciliatory approach “… that promotes the management, governance and awareness of the proper use and distribution of Oracle systems…” However, LMS is the official auditor and reviewer of Oracle licenses, but unlike COLS cannot offer discounts if you need to purchase additional licenses as a result of their audit or review findings.

However, it was reported in ‘The Register’ in Aug 2016, that COLS was in the process of being wound up, in line with Oracle’s strategy to move more of their services to the cloud. So, in future you should only have to deal with LMS.

A Quick Guide to Oracle Software

Download the white paper – A Quick Guide to Oracle Licensing Optimization – for a step by step guide to effectively manage and optimize Oracle licensing.

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