Negotiating Oracle ASFU License Agreements
Enterprise technology leaders and procurement professionals must approach Oracle ASFU (Application Specific Full Use) licensing agreements with careful strategy.
This article provides guidance for negotiating ASFU deals, whether you are an ISV bundling Oracle with your product or a customer buying an ISV solution that includes Oracle licenses.
We cover cost considerations, critical contract terms, and tactics to secure a fair deal while ensuring compliance and future flexibility.
Read Managing Oracle ASFU License Compliance and Avoiding Pitfalls.
Key Elements of an ASFU Agreement
When negotiating an ASFU license arrangement, focus on these core elements:
- Pricing & Support: Oracle typically gives about a 60% discount off list price to ISVs for ASFU licenses. Support is not mandatory; if added, it’s ~22% of the net license fee per year. Decide upfront if Oracle support will be included or if the ISV will handle support to save costs.
- Scope of Use: Specify exactly which application the Oracle software is licensed for. The contract should explicitly limit Oracle’s use to only that ISV application, nothing else.
- License Metrics: State the license metric (Processor or Named User Plus) and the quantity licensed. Ensure Oracle’s Named User Plus minimums (e.g., 25 per processor for Database Enterprise Edition) are met so you don’t inadvertently under-license. If possible, build in flexibility to add licenses or switch metrics if your usage changes.
- Upgrade Options: Try to include a clause that lets you convert the ASFU license to a full-use Oracle license later (with a predetermined fee or credit). This protects you if you ever need to use Oracle independently of the ISV’s application.
- Audit & Compliance: Oracle can audit the ISV’s use of licenses. Ensure the contract says the ISV is responsible for any compliance issues or additional licenses needed after an audit (as long as your company adheres to the agreed usage).
For Enterprise Customers
- Demand Transparency: Have the ISV detail the Oracle licensing in your deal (number of processor or NUP licenses and the cost attributed to them). This lets you verify that the licenses cover your usage (all required CPUs/users) and that the pricing reflects Oracle’s discount.
- Plan for Growth: Ask upfront how you can expand usage if needed. Ensure the contract allows you to buy additional ASFU licenses under the same terms, and clarify how you could convert to full-use licenses if your needs change significantly.
- Clarify Compliance Roles: Make sure it’s written who is responsible if there’s an audit or compliance issue. The ISV, as the Oracle license holder, should bear responsibility for providing additional licenses or remedies unless the issue was caused by your unauthorized use.
Recommendations
- Do Your Homework: Know Oracle’s list prices and typical discounts before negotiating. This knowledge helps you evaluate the ISV’s offer and push back if pricing seems off.
- Be Specific in Writing: Ensure the agreement explicitly names the application, environment (hardware/VM details), and the licensed counts (processors or users). Ambiguity can lead to disputes later.
- Secure Flexibility: Build in options where possible – for example, the right to purchase more licenses at the same discount, or predefined terms to upgrade to full-use licenses. This prepares you for future changes.
- Mind the Details: Don’t overlook “boilerplate” clauses. Ensure support terms, audit processes, and termination conditions are understood. Small clauses (like audit rights or transfer restrictions) can have big impacts.
- Consult Experts if Needed: If the deal is complex or high-value, involve an Oracle licensing expert or legal advisor. A small oversight in an Oracle contract can be very costly later – expert review can save money in the long run.
Read Choosing the Right Oracle ISV License: ASFU vs Embedded vs PAH.
FAQ
Can an ISV negotiate a deeper discount than 60% for ASFU?
No, not beyond ~60% in most cases. Oracle sets that standard discount for partners; only exceptionally large ISV deals might get a slightly better break.
What is a royalty model in the context of ASFU?
It means the ISV pays Oracle a percentage of its sales (e.g., 10% of subscription revenue) instead of buying licenses outright. This model is an alternative to the upfront discounted license fees and can align with ISVs’ recurring revenue models.
Are ASFU licenses always perpetual, or can they be subscription-based?
They are usually perpetual licenses from Oracle to the ISV. However, the ISV might offer the license to you as part of a subscription service. In practice, as long as you’re a customer of the ISV’s software, you’re covered by the ASFU license. If you stop using the ISV’s product (or your subscription ends), your right to use the Oracle software ends as well.
How can a customer convert an ASFU license to a full-use license later?
By paying Oracle for a new license or the difference in cost to upgrade. Typically, you would negotiate a deal to “buy out” the ASFU restrictions. Coordinate this through the ISV or directly with Oracle so that the conversion is properly documented. Usually, Oracle will credit some portion of what was originally paid and charge the rest at list price (or close to it).
What happens if the ISV goes out of business or stops supporting the product?
You could lose rights to use Oracle if the ISV’s solution is no longer in play. It’s wise to negotiate a clause that lets you keep or convert the Oracle license if the ISV goes under. Without such a clause, you would have to approach Oracle to license the Oracle software directly to continue using it.
Can an enterprise include ASFU licenses in an Oracle ULA (Unlimited License Agreement)?
Usually not. A ULA is between your company and Oracle for full-use licenses. ASFU licenses are owned and controlled by the ISV. To bring an ASFU deployment under your ULA, you would first need Oracle to convert it to a regular license that you own (which would likely incur a cost). Always clarify this with Oracle – don’t assume your ULA covers an ASFU-provided instance.
How long does it take for an ISV to get an ASFU agreement approved?
It’s not instantaneous. Getting Oracle’s approval and setting up an ASFU contract can take a couple of months, so ISVs need to plan ahead. (For a customer, this means if a vendor is not yet in the ASFU program, there might be a lead time before they can deliver the solution with Oracle.)
Is it possible to negotiate away the Oracle audit clause in an ASFU agreement?
No. Oracle will always insist on audit rights. The key is to ensure the ISV agreement specifies that the ISV will address any compliance issues found in an audit (as long as your company followed the agreed-upon usage rules). You can’t remove Oracle’s audit rights entirely.
If we need more Oracle licenses for the ISV solution (e.g., more users or moving to a bigger server), do we negotiate that with Oracle or the ISV?
Through the ISV. If you require additional capacity, you would purchase additional ASFU licenses from the ISV under the same terms as the original deal. The ISV will then obtain more licenses from Oracle on your behalf. You wouldn’t go directly to Oracle for more ASFU licenses (Oracle will refer you to the ISV). If your needs change drastically beyond the ASFU’s scope, you might consider negotiating a new arrangement or a full-use license with Oracle.
Is Oracle Support required or included with ASFU licenses?
No. Oracle technical support is not automatically included for ASFU licenses – it’s usually optional. Many ISVs do not include Oracle’s support in ASFU deals to keep costs down (instead, the ISV provides support to you as the customer). If Oracle support is needed, it can typically be added for an extra fee, but it’s not mandatory under an ASFU license.
