Comparing Oracle ESL, ASFU, PAH, and Full Use Licenses: Choosing the Right Model for Your Business

Comparing Oracle ESL, ASFU, PAH, and Full Use Licenses

Executive Summary:

This article compares four Oracle database licensing models: Embedded Software License (ESL), Application-Specific Full Use (ASFU), Proprietary Application Hosting (PAH), and Full Use licenses.

It’s written for enterprise CIOs, CTOs, and procurement leaders to help them understand how each model works, who it’s for, and how to choose the right one.

We explain each licensing model’s restrictions, benefits, and ideal use cases clearly to help you make informed decisions about integrating or purchasing Oracle-based solutions.

Overview of Oracle Licensing Models for ISVs and Enterprises

Oracle offers multiple licensing models for its database and middleware products.

The key models relevant to Independent Software Vendors (ISVs) and enterprise customers are Embedded Software License (ESL), Application-Specific Full Use (ASFU), Proprietary Application Hosting (PAH), and traditional Full Use licenses.

Each model varies regarding usage restrictions, pricing discounts, support obligations, and target users.

Understanding these differences is crucial for CIOs and IT decision-makers, whether you’re an ISV embedding Oracle in your solution or an enterprise evaluating a vendor’s Oracle-powered product.

• Embedded Software License (ESL): Oracle technology is embedded into a third-party application, with strict usage limits (only within that application). ESL offers deep discounts (~90% off list price) or a royalty-based model for ISVs, and the end-user typically isn’t even aware Oracle is inside. This model requires the ISV to be an Oracle Partner and is ideal for turnkey solutions where the customer doesn’t manage the database separately.
• Application Specific Full Use (ASFU): Oracle licenses sold by an ISV for use with a specific application. The end customer is the license owner, and Oracle’s standard support can apply. ASFU is less restrictive than ESL but still limits usage to one application. Discounts are moderate (often 40–50% off list), and support is usually required. It suits solutions needing more customer control (e.g., customer DBAs managing the database) while still tied to a vendor’s software.
• Proprietary Application Hosting (PAH): A licensing model for ISVs or service providers to offer Oracle-powered software as a hosted service (SaaS). Oracle PAH licenses allow hosting Oracle Database or Middleware for multiple end customers as part of a proprietary solution. Like ESL/ASFU, usage is restricted to the specific service, and customers cannot use the Oracle software standalone. PAH is common for SaaS providers and Managed Service Providers who run Oracle in their cloud or data center for clients. Pricing is typically negotiated (a discounted license or a usage-based royalty), and the provider must be an Oracle partner with a Proprietary Hosting agreement.
• Full Use License: The traditional Oracle license acquired directly from Oracle or resellers. It has no application-specific restrictions – the customer can use the Oracle software for any purpose. This flexibility comes at the highest cost (standard price list, no special ISV discounts) and normally requires paying Oracle’s annual support (approximately 22% of license cost yearly). Full use licenses are for end customers who want complete control and the ability to use Oracle in any context.

Understanding these models helps CIOs and procurement leaders choose the most cost-effective and appropriate licensing approach for their needs, whether embedding Oracle in a product, purchasing a third-party solution with Oracle included, or licensing Oracle directly.

Read Negotiating Oracle ESL, ASFU, and PAH Agreements.

Embedded Software License (ESL) – Oracle Inside, Invisible to Users

Oracle Embedded Software License (ESL) allows an ISV to bundle Oracle Database or other Oracle software inside their application or device.

Oracle is not separately licensed by the end customer; it is pre-integrated and “invisible” as part of the product.

Key characteristics of ESL include:

• Usage Restrictions: Oracle software can only be used in ISV applications. End users cannot access Oracle tools or use the database for anything outside that specific application. For example, suppose the Oracle Database is embedded in a medical device’s software. In that case, it cannot run custom queries or other apps; its use is locked down to that device’s functionality.
• ISV Partnership Requirements: Only approved Oracle partners can offer ESL. The ISV must join the Oracle PartnerNetwork (OPN) and sign an ESL agreement, defining the application in an Application Package Registration Form (APRF). The APRF outlines exactly what the Oracle software will be used for (the “application package”). Oracle grants a huge discount in exchange for these strict terms.
• Pricing and Discount: ESL is extremely cost-effective for the ISV. Oracle provides a 90% discount off the standard price list for licenses under ESL. For instance, if an Oracle Database Enterprise Edition processor license lists $47,500, under ESL, an ISV might pay roughly $4,750. This low cost (or a low per-customer royalty fee) enables ISVs to include Oracle technology competitively. Notably, Oracle technical support fees are not mandatory for ESL licenses – many ISVs opt not to purchase support to save costs, but provide all maintenance to the customer.
• Support and Maintenance: Under ESL, the ISV is fully responsible for supporting the Oracle software. Oracle Support will not interact with the end customer. If a patch or upgrade is needed, the ISV obtains it (through their partner channels or Oracle’s public updates) and rolls it into their product updates. The user contacts the ISV for all issues. This simplifies the customer’s experience (one support contact for the whole solution), but places the onus on the ISV to keep Oracle components up-to-date.
• Ideal Use Case: ESL is best for turnkey solutions and appliances. Customers who want an “all-in-one” product benefit from not having to deal with Oracle licensing – it’s bundled. ISVs use ESL to make their solution easy to adopt (no separate Oracle purchase needed) and cheaper than if the customer had to buy Oracle full licenses. A downside is a lack of flexibility; the customer cannot repurpose or expand the Oracle usage beyond the embedded scenario.

Application Specific Full Use (ASFU) – Bundled Oracle with More Flexibility

Oracle ASFU licenses are another ISV-oriented model where Oracle software is bundled with a specific application, but the end customer holds the license.

Think of ASFU as a middle ground between ESL and a normal Oracle license:

• Usage Restrictions: Similar to ESL, an ASFU Oracle license must be used only with the specified application. For example, an ISV selling a specialized billing software can include an Oracle Database ASFU license that allows the database to be used only with that billing software. The customer owns this Oracle license, but contractually, they can’t use it for other purposes or with other systems.
• License Ownership: Unlike ESL (where the ISV is effectively the licensee and end users just get a right to use the embedded Oracle), in ASFU, the end customer is the official license owner of Oracle software, just with a restriction. This means the customer’s name is on the Oracle license, and they could interface with Oracle for support (typically through the ISV’s arrangement).
• Support Obligations: Oracle usually requires or encourages Oracle Support on ASFU licenses. In practice, the ISV often resells or coordinates Oracle support, but Oracle’s support organization can assist the end customer. The ISV may still handle first-line support, but critical issues can be escalated to Oracle since the license is standard (with an application-use clause). The customer (or ISV on their behalf) pays the annual Oracle support fee (around 22% of the net license price).
• Pricing and Discounts: ASFU licenses typically offer a smaller discount than ESL licenses. Commonly, Oracle might offer 40–50% off the list price for ASFU deals, depending on the ISV’s partnership level and volume. For example, a $50,000 Oracle component might be sold for $25,000 under ASFU. This is more expensive than ESL’s pricing, but the customer gets more direct license rights and Oracle support.
• Comparison to ESL: ASFU is less restrictive than ESL in practical operation. For instance, customers’ DBAs (Database Administrators) might be allowed to perform certain direct maintenance on the Oracle database, and Oracle support tickets can be opened. However, the usage scope remains limited to the ISV’s application – the customer can’t use that Oracle database for a different home-grown application. ASFU is often chosen when the solution is complex or mission-critical enough that Oracle’s formal support and direct license to the customer is beneficial.
• Ideal Use Case: ASFU suits enterprise software solutions where customers may need more control over the embedded Oracle environment. If a CIO wants the comfort that their team can manage the database or that they have Oracle’s backing if things go wrong, ASFU provides that while offering cost savings over full licenses. It’s also the model used when an ISV’s product might require more direct interaction with Oracle tools (e.g., running queries, doing backups with Oracle RMAN) by the customer’s IT staff – things typically forbidden under ESL.

Oracle PAH (Proprietary Application Hosting) – Oracle Licensing for SaaS Providers

Oracle PAH licenses are designed for ISVs and service providers offering hosted services (SaaS) built on Oracle technology.

In this model, the ISV hosts an Oracle-based application on its own or third-party cloud infrastructure and serves multiple customers.

Key points about PAH:

• Hosted Application Focus: The Oracle software (database, middleware, etc.) is deployed in the provider’s environment (data center or cloud) and is accessed remotely by customers as a service. Customers do not get Oracle licenses themselves; the provider’s Oracle PAH agreement covers usage across all service subscribers.
• Usage Scope: Like other ISV models, Oracle under PAH can only run the provider’s proprietary application for multiple end clients. It cannot be used for third-party applications or the provider’s internal business unrelated to that service. For example, a SaaS HR software company can use Oracle Database under PAH to support all its tenants. Still, it can’t use that same license to run an internal finance system, which would require a separate license.
• Licensing Metrics: PAH agreements usually quantify usage using standard metrics like Processor or Named User Plus licenses. The provider must license enough Oracle processors or NUPs to cover the load of their hosted environment. For instance, if their SaaS runs on a server cluster of 32 cores (with an Oracle core factor, say 0.5 for Intel chips), they’d calculate processors = 32 * 0.5 = 16 Oracle processor licenses needed. Alternatively, if licensing by NUP, they might license a certain number of named users (e.g., 500 users) accessing the service.
• Pricing and Terms: Oracle PAH licensing is obtained through an OPN agreement specifically for hosting. Oracle phased out older “generic hosting” licenses in favor of PAH around 2010 to better control usage. Discounts in PAH can vary; there isn’t a one-size-fits-all number like ESL’s 90%. Often, providers negotiate pricing based on expected volume or opt for a monthly reporting & royalty model (pay Oracle a percentage or fee per user/month). The financial model must support a multi-customer environment, so flexibility is key. Oracle may also require periodic usage reporting under PAH to ensure compliance and proper royalty payments.
• Support: Typically, the hosting provider (ISV) is responsible for front-line customer support, similar to ESL. However, since PAH uses standard Oracle licenses under the hood, the ISV likely maintains an Oracle support contract for those licenses. The end customers don’t have Oracle support; they receive it as part of the SaaS service. The provider works with Oracle on any backend issues (much like how cloud providers handle software vendor support).
• Ideal Use Case: Oracle PAH is intended for SaaS companies, cloud solution providers, or any scenario where an Oracle-based application is offered as a subscription service. It enables providers to legally host Oracle software for many clients under one agreement, without each client needing their own Oracle license. For CIOs at companies consuming such services, PAH means you can use an Oracle-powered solution with zero Oracle paperwork on your side – just ensure your provider is correctly licensed.

Full Use Oracle Licenses – Unlimited Flexibility for the Customer

A Full Use license is the standard Oracle licensing most enterprises are familiar with.

It’s not tied to any application – once purchased, you can deploy the Oracle software for any purpose within the terms of Oracle’s general licensing policies.

Key aspects:

• No Application Restrictions: Unlike ESL, ASFU, or PAH, a full use license allows the customer to run any application or workload on Oracle Database or other programs. You can install the software on any eligible system and use it standalone or with multiple applications. This is the most flexible option; however, that freedom comes with higher costs and responsibilities.
• License Acquisition: Full-use licenses are obtained via Oracle’s standard sales channels. Enterprises often negotiate enterprise agreements or purchase through Oracle resellers. There’s no need to be an ISV partner; customers can buy what they need. ISVs can also resell full-use licenses if they prefer not to use ESL/ASFU models, but then the customer becomes an Oracle customer directly for those licenses.
• Cost and Support: Full use licenses follow Oracle’s official Price List. For example, Oracle Database Enterprise Edition is roughly $47,500 per processor license (prices vary by edition and country), and Named User Plus licenses are around $950 each (with a minimum of 25 NUP per processor for Enterprise Edition). Discounts on full-use licenses typically come from negotiations or volume purchases, not built-in like ESL/ASFU. After purchase, annual support is typically 22% of the net license fee – a significant ongoing cost – but it provides access to updates and Oracle support services. Most enterprises maintain support to get patches, new versions, and assistance.
• Responsibilities: With great power comes great responsibility – if you have full use licenses, your organization is fully accountable for compliance. Oracle can audit your usage to ensure you’ve correctly licensed all processors, users, and optional features. Managing these licenses requires careful tracking of deployments, users, virtualization, and even the “10-day rule” for disaster recovery servers (Oracle’s policy allowing up to 10 days of unlicensed usage on a standby server per year before it must be licensed). CIOs often invest in Software Asset Management tools and services to comply with full use licenses.
• When to Use Full Use: Full use licenses make sense for organizations that want complete control and perhaps use Oracle as a general-purpose platform. If an enterprise has multiple applications or unpredictable use cases for Oracle technology, a full use license is the only model that provides flexibility. Additionally, if an ISV does not offer an embedded/ASFU option, the customer might need to procure full-use licenses to run the ISV’s application. From the ISV perspective, some choose not to engage in Oracle’s partner licensing and instead require customers to “Bring Your License” (BYOL), in which case, each customer uses full-use licenses for the ISV’s software.

Choosing the Right Oracle License Model

Selecting the appropriate licensing model depends on your role (ISV or end customer) and your objectives:

• For ISVs/Service Providers: If you want to bundle Oracle tech seamlessly into your product and offer a one-stop solution, ESL provides maximal discount and the tightest control (great for appliances or software where customers don’t need to touch the database). If your customers require direct ownership or you need Oracle’s support as part of the offering, consider ASFU despite the higher cost. For those delivering software as a service, PAH is likely the only compliant route to host Oracle for multiple clients. In all cases, you’ll need to join Oracle PartnerNetwork and sign the appropriate agreements. Consider your support capabilities and how much control your customers expect: choose ESL if you will handle everything and keep Oracle truly “under the hood,” or ASFU/Full Use if customers are more hands-on.
• For Enterprise Customers: When evaluating third-party solutions, know how the vendor licenses Oracle. Suppose the product includes an Oracle ESL license. In that case, you won’t need to purchase Oracle licenses, but know that you rely on the vendor for support and cannot repurpose that database for anything else. If it’s ASFU, you technically own an Oracle license (tied to the app) and may have direct support, which is useful if your team has Oracle expertise. If the vendor requires you to BYOL, you might leverage existing full-use licenses or negotiate new ones (possibly at a discount if buying through the vendor’s partnership). From a cost perspective, ESL-based solutions might be cheaper overall, but ensure the vendor’s capabilities to support and update Oracle are solid. ASFU solutions might cost more, but you have Oracle’s backing.
• Compliance and Risk: ESL and PAH shift Oracle compliance responsibility largely to the vendor/ISV (Oracle will audit them, not you), which can reduce audit risk for customers. However, misuse of an embedded license by a customer (using it beyond the allowed scope) can still cause breaches of contract. Full use licenses give you freedom but also put you directly in Oracle’s audit scope – you must manage usage diligently (watch for things like enabling extra database features accidentally, or failing to meet NUP minimums on a multi-core server).
• Cost Trade-offs: If cost is the prime concern and the use case is narrow, ESL is incredibly cost-efficient. ASFU and PAH offer moderate savings over full use, while full use is the most expensive, but with broad rights. Sometimes, large enterprises with an Oracle Unlimited License Agreement (ULA) might not benefit from an ISV’s embedded license since they already have the right to deploy Oracle. In such cases, discuss with the vendor if they support a BYOL model or credit for your existing licenses. Most ISV programs don’t easily allow swapping ESL/ASFU with a customer’s license, but it’s worth asking in negotiation if relevant.

Below is a summary comparison table of the four models to highlight key differences:

Recommendations

For CIOs/CTOs evaluating or offering Oracle-based solutions, consider these strategic recommendations:

• Match the Model to Your Business Strategy: If you don’t need customers to manage the database, choose ESL for a seamless, low-cost embedded solution. Opt for ASFU when customers need license ownership or Oracle support. Use PAH for multi-tenant SaaS offerings. Stick to Full Use for maximal flexibility or BYOL scenarios.
• Leverage Discounts and Savings: If you’re an ISV, capitalize on Oracle’s ESL discount (around 90%) to improve your product’s pricing or margins. As a customer, understand that an embedded license likely means you’re getting Oracle’s capabilities at a fraction of the usual cost – a potential value driver for the solution.
• Clarify Support Expectations: Ensure it’s clear who provides support. Under ESL and PAH, confirm that the vendor has a robust support process for Oracle issues (patches, upgrades). With ASFU, verify that Oracle support is included in the deal and that either you or the vendor will handle communication with Oracle.
• Plan for Compliance: Even if Oracle won’t audit you directly in ESL/PAH situations, maintain good internal compliance. Document any Oracle components in vendor solutions and make sure your staff knows the limitations (e.g., not using an embedded database for ad-hoc queries). For full use licenses, invest in regular internal audits and asset management to prevent compliance gaps (watch Named User Plus minimums and the “10-day rule” for disaster recovery).
• Negotiate Terms Upfront: If you are entering an ESL/ASFU/PAH agreement (as either an ISV or a customer via your contract with an ISV), pay attention to contract details. ISVs should define the application scope broadly enough in the APRF to cover future functionality (to avoid needing a new agreement later), and customers should ensure the contract addresses responsibilities if Oracle licensing issues arise.
• Evaluate Transition Options: Consider the future – if you need to transition from an embedded model to full use (for example, if you outgrow the vendor or need direct control), know that ESL/ASFU licenses generally cannot be converted to full use. You’d have to acquire new licenses. Plan for this in risk assessments. Similarly, ISVs should plan an exit strategy in case they or their customer ever need to move to a different model (like ending a service – what happens to the Oracle licenses?).

FAQ

Q1: What is the simple difference between an ESL and an ASFU license?
A1: An ESL (Embedded Software License) is owned and managed by the ISV and can only be used invisibly inside the ISV’s product – the end user doesn’t directly interact with Oracle licensing or support. The end customer owns an ASFU (Application Specific Full Use) license (sold via the ISV) but is contractually tied to one application. ESL is more restrictive and offers a bigger discount; ASFU offers more flexibility and Oracle support, but at a higher cost.

Q2: Can an end customer convert an ESL or ASFU license into a Full Use Oracle license?
A2: No, conversion is not permitted. Oracle ESL and ASFU licenses are non-transferable and non-upgradable to full use. If a customer needs to use Oracle beyond the allowed scope (say, the ISV’s application is no longer used, or they need the database for something else), they must purchase new Full Use licenses from Oracle. ESL/ASFU agreements explicitly prohibit converting those licenses into general-purpose ones.

Q3: Who is responsible for Oracle support in each model?
A3: The ISV is fully responsible for all support for ESL – the customer cannot call Oracle. In ASFU, the customer typically has rights to Oracle support (and usually pays for it), often coordinated through the ISV (the ISV may still handle day-to-day support, escalating to Oracle as needed). In PAH, the hosting provider supports the end users, and the provider works with Oracle for backend support under their agreement. With Full Use licenses, the end customer itself has a support contract with Oracle and can directly log support tickets with Oracle Support.

Q4: What does the “10-day rule” mean, and does it apply to these license models?
A4: The 10-day rule is an Oracle policy for disaster recovery: it allows a standby/failover server to run Oracle for up to 10 days total in a year without requiring a separate license, as long as it only runs during emergencies/testing. This rule applies to any Oracle license, including those under full use or possibly ASFU/PAH if the contracts allow standard policies. However, it’s mostly relevant to customers managing their own Oracle deployments. Under ESL/PAH, the ISV/provider should handle DR licensing – customers should ask if the vendor’s Oracle licensing covers failover environments. For ASFU or Full Use, if you have your own Oracle licenses, you can use the 10-day rule for your standby databases (make sure to track usage days!). Always verify the contract terms; your agreement can update or override Oracle’s rules.

Q5: If my company already has an Oracle Unlimited License Agreement (ULA), can we use it instead of an ISV’s embedded license?
A5: Generally, no, if an ISV solution is sold under an ESL or ASFU model, you must use the licenses as provided through that model for that application. Your ULA or existing licenses can’t simply be applied to the ISV’s application unless the ISV allows a BYOL scenario. Most ISV agreements don’t accommodate BYOL easily because the pricing and support model is built into their product. You could negotiate with the vendor to see if a BYOL option is possible (perhaps via a different contract arrangement). Still, often the answer is that the solution “includes Oracle” and cannot be separated.

Q6: What happens if an end customer uses an embedded Oracle database beyond the ISV’s application (for example, connects a third-party reporting tool to it)?
A6: This would violate the license terms. Under ESL/ASFU, the Oracle software is restricted to the specified application. If a customer were to use it independently (even for read-only reporting or other integrations not approved), it breaks the contract. In such a scenario, the ISV would breach their agreement with Oracle, and the customer likely breaches their agreement with the ISV. The consequence could be forced compliance: the customer might need to purchase appropriate Oracle licenses (or stop the usage), and the ISV could face penalties from Oracle. It’s a serious compliance issue, so it must be avoided.

Q7: Are Oracle PAH licenses perpetual, or are they a subscription?
A7: Oracle PAH licenses can be structured in different ways. Often, they are still considered Oracle perpetual licenses that the provider holds, but the provider might pay Oracle periodically based on usage (royalties). Some PAH agreements might be term-based or have annual commitments. From the end customer’s view, it’s usually a subscription service (you pay the provider for the service). But behind the scenes, the provider has a licensing arrangement with Oracle that could involve upfront licenses plus support or a pay-as-you-go model. The exact structure depends on whether the ISV/Provider has an agreement with Oracle.

Q8: If an ISV with an ESL license goes out of business or stops supporting the product, what is the customer’s recourse regarding the Oracle software?
A8: This can be tricky. Because the ISV holds ESL licenses and only valid as part of that application, the customer cannot legally use the embedded Oracle software independently. If the vendor goes under, the customer would not have a valid Oracle license to continue using the Oracle database (except as tied to that application, which may no longer be supported). In practice, customers in this situation might negotiate with Oracle to obtain full use licenses to keep systems running or seek a new vendor. It’s a risk to consider in critical systems, one mitigation is to ensure there’s an escrow or contingency plan in your contract, or at least be aware that a transition to full-use licenses may be required if you need to take over operation of an Oracle-based system from a defunct ISV.

Q9: Can an ISV mix different Oracle licensing models for the same product or customer?
A9: Mixing models is generally prohibited for the same deployment. For example, you shouldn’t have some licenses under ESL and some under full use for one solution; that creates compliance confusion and is against Oracle policy. An ISV might use ESL for one of its products and ASFU for another distinct product, but within a single product environment, they will choose one model. Similarly, a customer environment should avoid mixing an embedded license database with a full-use database in a way that blurs boundaries (like linking them), which could be seen as bypassing the ESL restrictions. Always keep different license types segregated. Oracle’s rules explicitly forbid combining ASFU/ESL licenses with other license types for the same software deployment.

Q10: How do I know which Oracle licensing model a vendor uses for their solution?
A10: Vendors should disclose this in contracts or during procurement discussions. Clues include “embedded Oracle license included” (pointing to ESL) or an Oracle ordering document for an ASFU license in your name. Ask the vendor directly: Is the Oracle software licensed under ESL, ASFU, PAH, or do we need to provide our license? Also, look at who provides support – if the vendor says “all support is through us and you don’t deal with Oracle,” that suggests ESL. Getting Oracle support credentials or an Oracle CSI number suggests ASFU or full use. It’s important to know because it affects your responsibilities and rights.

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