Case Study – Oracle Licensing Assessment – African Government Agency – Oracle EBS, Database & Middleware
Background: A government services agency in South Africa utilizes Oracle E-Business Suite to manage finance, HR, and procurement, with Oracle Database and middleware serving as the foundation for the system.
After years of expanding its workforce and services, the agency suspected it had outgrown some of its Oracle EBS user licenses.
We were brought in to perform an Oracle license assessment and assist with possible contract negotiations.
Challenges: The main issue was EBS user licensing:
- User Count Overruns: The agency’s Oracle EBS licenses were based on named users, but the organization had grown to significantly more employees using the system than were licensed. They had, for instance, 1,200 staff with access to EBS but only 1,000 user licenses – a 200-user license shortfall. Regular onboarding of new employees and external contractors had outpaced procurement’s updates to the Oracle license count.
- Budget Constraints: As a public sector entity, the agency had a limited budget to address a large true-up. Purchasing hundreds of additional EBS user licenses at list price (plus 22% annual support on each) would be a major unplanned expense.
- Upcoming Contract Renewal: The Oracle support renewal was looming, meaning they needed to resolve licensing to avoid non-compliance before renewing (and ideally to negotiate better terms on the renewal).
Solution: We took a two-pronged approach – optimize where possible, then negotiate:
- Usage Audit & Cleanup: First, we analyzed EBS usage to ensure the user count was accurate. We identified ~100 inactive user accounts that belonged to individuals who had left the agency; these were terminated, immediately reducing the license gap. We also identified some generic/shared accounts that could be eliminated or replaced with individual accounts (Oracle counts generic logins as requiring a license each). These steps reduced the effective user count to approximately 1,100.
- Strategic Negotiation: With a remaining shortfall of ~100 EBS user licenses, we advised the agency to negotiate a contract with Oracle rather than simply purchasing the licenses. We leveraged the situation – Oracle’s knowledge of their non-compliance and the pending renewal – to push for better commercial terms. Oracle was keen to maintain a good relationship with a government client, so we negotiated a deal to cover the 100 extra users at a steep discount (approximately 50% off the list price). Additionally, Oracle agreed to include those new licenses under the existing support contract with no immediate support fee increase (essentially giving a support holiday on the added licenses until the next fiscal year). We also locked in a 0% support price increase for the next 2 years on the entire EBS estaterfdinc.com, something we pressed for given the agency’s budget needs.
Outcome: This case did not require full gap elimination by reduction; instead, we turned it into a financial win through negotiation.
The agency resolved its compliance gap by obtaining the necessary licenses at a fraction of the normal cost, thereby avoiding what could have been a seven-figure expenditure.
By negotiating at renewal time, we also improved Oracle’s contract terms: the support costs were effectively held flat for two years (versus Oracle’s standard annual uplift of ~4%), and the agency’s license pool is now right-sized for its user base.
In total, the agency achieved an immediate support cost savings of ~15%, and even more importantly, they dodged a potential audit fine or unplanned license bill.
This outcome exemplifies how savvy negotiation can defuse compliance issues cheaply – for instance, we’ve seen Oracle compliance exposures of $10M negotiated down to near $1M settlements in similar situations, and $30M audit claims settled for $1M.
The South African agency can now continue its operations with confidence that its Oracle licensing is both compliant and cost-effective.
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