Choosing the Right Oracle ISV License: ASFU vs Embedded vs PAH
CIOs, CTOs, and procurement heads often need to choose the best Oracle licensing model for software solutions provided by Independent Software Vendors (ISVs).
This article compares Oracle’s Application Specific Full Use (ASFU) license, Embedded Software License (ESL), and Proprietary Application Hosting (PAH) license.
We break down their differences in cost, restrictions, and use cases to help enterprises and ISVs select the right option for Oracle Database and middleware deployment.
Key Differences at a Glance
Oracle offers three primary license models for ISVs bundling Oracle technology with their products. Each provides significant cost savings versus standard Oracle licenses, in exchange for strict limitations on usage:
Oracle ASFU (Application Specific Full Use): ~60% off Oracle’s list price. Only for use with the ISV’s specified third-party application, deployed on the customer’s site. The end customer holds the license, but Oracle software cannot be used beyond the ISV application (support is provided by the ISV).
Oracle Embedded License (ESL): ~90% off list. Oracle software is embedded in the ISV’s product (software or hardware) and not separately accessible or configurable by the end user. It cannot be used outside the integrated solution. Support is through the ISV (Oracle does not support end customers directly).
Oracle PAH (Proprietary Application Hosting): ~50% off list (or a negotiated royalty model). For ISVs hosting their application as a service for multiple customers (SaaS). The ISV holds and manages the Oracle licenses in their cloud or data center; end clients only use the application and do not manage any Oracle licenses themselves.
Pricing Example: (Oracle Database Enterprise Edition license)
- Full Use list price: ~$47,500 per processor (plus 22%/year support)
- ASFU price: 40% of list ($19,000 per processor)
- Embedded (ESL) price: 10% of list ($4,700 per processor)
- PAH license: Typically ~50% off list or a ~10% royalty on revenue
These steep discounts lower costs, but only allow use within the specified application/service – any other usage is not permitted.
Read Negotiating Oracle ASFU License Agreements – Key Strategies.
Recommendations
- Match License to Deployment: Use ASFU for on-premises single-customer solutions, ESL for embedded appliances or software, and PAH for multi-customer cloud/SaaS services.
- Plan for Changes: If you might need broader Oracle use later, negotiate a conversion or upgrade path now (to avoid surprises later on).
- Clarify Support Duties: Confirm who provides Oracle support. With ASFU/ESL, it’s usually the ISV (Oracle isn’t supporting the end customer directly).
- Document Restrictions: Record the specific usage terms (application name, licensed users/cores, etc.) and educate your IT staff on these limits to prevent accidental misuse.
- Avoid Mixing Licenses: Keep ASFU/ESL deployments completely separate from any full-use Oracle environments to prevent compliance issues and confusion.
FAQ
How is an ASFU license different from a full Oracle license?
ASFU is sold via an ISV at around a 60% discount but is restricted to that ISV’s application. A full-use Oracle license is bought directly from Oracle at list price and has no such restrictions (it can be used for any internal purpose).
What’s the advantage of an Embedded (ESL) license?
It provides ~90% off Oracle’s list price. It’s ideal when Oracle is hidden inside an appliance or software solution. The downside is that the customer cannot use or access Oracle outside of that product, and all support is handled by the ISV (Oracle won’t support the end user directly).
When would a PAH license be appropriate?
Use PAH if an ISV or provider offers their software as a hosted service (SaaS) to multiple customers. PAH is the only legal way to use Oracle technology in a multi-client hosted environment. End customers don’t need Oracle licenses in this case – they just access the service.
Can an ISV offer both ASFU and PAH options for its software?
Yes. For example, an ISV might sell an on-premises version of the product with an ASFU license for Oracle, and also offer a cloud/SaaS version using a PAH license. Each scenario requires its own Oracle agreement, and each Oracle instance must be used only as permitted (on-prem ASFU deployment can’t be repurposed for cloud use and vice versa).
Are the ISV license discounts negotiable beyond the standard 60% or 90%?
Usually not. Oracle fixes the ASFU and ESL discounts (roughly 60% and 90% off list). Large ISVs might get special arrangements or opt for a royalty model instead, but end customers typically cannot influence Oracle’s discount. Knowing about the built-in discount can help you understand the pricing you’re offered by the ISV.
Do end customers ever deal directly with Oracle for ASFU licenses?
No. Your agreement is with the ISV. The ISV is Oracle’s partner and holds the license. If you need more capacity or a different usage of Oracle, you would go through the ISV (or purchase a separate full-use license from Oracle). You don’t have a direct licensing relationship with Oracle for an ASFU deployment.
Is Oracle support included with ASFU or Embedded licenses?
Not by default. Typically, the ISV provides support for the Oracle software as part of their solution. Oracle’s own support is optional – the ISV may choose to include it (passing the cost on to you) or exclude it to keep costs lower. End customers cannot log support tickets with Oracle on ASFU/ESL licenses; those go through the ISV.
What if we use the Oracle database beyond the ISV application’s scope?
That’s a license violation. For example, if you run a custom report or connect another application to the Oracle database that was licensed under ASFU, you’re not legally covered. If such misuse is discovered (say, during an audit), you or the ISV would need to immediately license that usage properly, often by purchasing full-use Oracle licenses for that server, which can be very costly after the fact.
Can an ASFU license be converted to a full Oracle license?
Yes. You can pay Oracle to convert it (effectively paying the difference between the discounted price and the full price, sometimes with a conversion fee). Typically, this is arranged through the ISV or with Oracle directly. It’s wise to negotiate the potential conversion terms upfront if you suspect you may need this in the future.
Does Oracle’s 10-day rule for failover apply to ASFU deployments?
Yes. Oracle’s standard policies (like the “10-day rule” allowing a disaster recovery server to run Oracle for up to 10 days per year without separate licensing) still apply to ASFU-licensed environments. Any failover or DR use must be strictly for the same ISV application. It’s good practice to document any DR scenario and ensure it aligns with Oracle’s policies.
