Oracle licensing agreements include:
- Oracle Ordering Document: Specifies purchased products and services.
- Oracle Master Agreement (OMA): Outlines overall terms and conditions.
- Oracle Amendment: Modifies existing agreements.
- Oracle License Assignment Document: Transfers licenses between entities.
- Oracle Support Renewal: A Process for Renewing Support Contracts.
- Oracle Licensing Policy Document: Details policies like public cloud authorization and partitioning.
- Oracle Technical Support Policies: Defines support services and conditions.
Oracle Contracts – Oracle Licensing Agreements
Oracle’s on-premises licensing agreements consist of an overarching master contract plus individual order documents for each purchase.
Understanding the Oracle Master Agreement (OMA), ordering documents, and annual support renewals is critical for effective cost control and compliance.
This article provides an overview of Oracle’s on-prem contract structure and offers guidance on negotiation tactics and support management.
Oracle Master Agreement (OMA)
The OMA is the umbrella contract defining the overall terms of your relationship with Oracle.
Key elements include:
- Audit Rights: Oracle reserves the right to audit your software usage to verify compliance with its terms and conditions. You agree to cooperate with audits, so stay within your licensed quantities.
- Support Terms: The OMA incorporates Oracle’s support policies. If you purchase support, it renews annually (typically 22% of license fees per year) under Oracle’s standard terms.
Negotiate the OMA upfront to include any necessary protections. For example, ensure it covers all your global subsidiaries that will use Oracle software, and add provisions you find important (such as transfer rights or audit-frequency limits).
Since the OMA governs all future orders, getting favorable terms in it sets a foundation that benefits every purchase.
Oracle Ordering Documents
Each time you purchase Oracle licenses, you sign an ordering document that outlines the specifics of that transaction.
It includes:
- Products & Metrics: The Oracle product names, number of licenses, and the licensing metric (e.g., processors or named users) for each item.
- Pricing & Discounts: The total license fees are at the list price and your net cost after any negotiated discount. It also shows the first-year support fee (usually 22% of the net license price).
- Special Terms: Any unique conditions for that deal, for example, special usage rights or limits on future costs. If you negotiated something like this, it must be in the order document or an attached addendum.
Ordering documents is short but legally binding. Always review them line by line to ensure they match what was negotiated (products, quantities, prices, and special terms) before signing.
For example, purchasing four Oracle Database Enterprise Edition processor licenses (list price: $47,500 each) with a 50% discount would cost approximately $95,000 upfront, and the annual support fee for these licenses would be around $20,900.
Oracle Support Renewals
After the initial purchase, Oracle’s ongoing maintenance fees (support costs) become a major factor.
Key points about support renewals:
- Annual Fee & Increases: Premier Support costs ~22% of the license price per year. Oracle often raises this fee by 3–5% annually, resulting in support costs that increase every year.
- All-or-Nothing Coverage: Oracle’s policy requires keeping all licenses of a product on the same support level. You typically cannot drop support on just a subset of licenses without Oracle re-pricing (and likely increasing) the support cost on the remaining ones.
- Stopping Support: If you stop paying support, you lose access to new updates, patches, and Oracle’s help. Reinstating support later is extremely expensive (you’d pay the lapsed fees plus penalties). In practice, most enterprises maintain active Oracle support for critical systems to ensure they receive timely fixes and upgrades.
Negotiating Oracle License Contracts
Oracle’s sales process allows—and even encourages—negotiation. Use these tactics to improve your deal:
- Timing & Discounts: Align big purchases with Oracle’s end-of-quarter or fiscal year-end (May 31) when sales teams are eager to close deals. This timing, combined with assertive negotiation, can yield very steep discounts off list prices.
- Limit Future Cost Growth: Include contract terms to control long-term costs. For example, negotiate a cap on how much Oracle can increase your annual support fees, or lock in discount rates for any additional licenses you buy in the next couple of years.
- Get Everything in Writing: If Oracle promises something special during negotiations (such as a price hold for next year or permission to use the software on a backup server without additional licenses), ensure that this promise is written into the final contract or order document. Anything not documented in the agreement will not be honored later.
Recommendations
- Centralize Your Oracle Contracts: Keep your OMA and all Oracle ordering documents (and renewal quotes) in one repository for quick reference to terms and dates.
- Double-Check New Orders: Always verify each Oracle order document against the negotiated terms and conditions to ensure accuracy. Confirm the products, quantities, metrics, and prices are correct, and that all special terms you agreed on are included in the paperwork.
- Proactively Manage Support: Don’t auto-renew Oracle support without review. Before each renewal, identify any licenses you aren’t using and consider dropping their support (if policy allows) to save costs. Never accept a large support increase without pushing back – treat it as a negotiation opportunity.
- Audit Your Usage Regularly: Periodically compare your Oracle software deployments to your license entitlements. Address any internal compliance gaps (such as uninstalling unlicensed features or purchasing additional licenses) to avoid potential surprises if Oracle audits your organization.
- Plan in Contracts: Anticipate future needs and risks and negotiate flexibility upfront. If you expect growth, negotiate pricing protections for additional licenses. If a merger or reorganization is possible, ensure the contract allows license transfers or includes all affiliates. It’s much easier to get these terms at the start of an agreement than after it’s signed.
Checklist: 5 Steps to Manage Oracle Contracts
- Collect Oracle Contracts: Compile your OMA and all ordering documents (plus support policy files) in one repository.
- Compare Licenses to Usage: Audit your Oracle deployments to ensure they match your purchased licenses, identifying any gaps or unused licenses.
- Track Renewal Deadlines: Set reminders well in advance of support renewal dates to allow sufficient time for review and any necessary cancellations or changes.
- Align Stakeholders: Involve IT, procurement, finance, and legal teams early to agree on objectives before negotiating with Oracle.
- Document All Terms: Ensure every negotiated special term or discount is put in writing (in the contract or an addendum) so it’s enforceable later.
FAQ
Q1: What is the Oracle Master Agreement (OMA), and do we need one?
A: The OMA is Oracle’s master contract that covers the general terms for all your on-prem software licensing. Yes, you need an OMA – Oracle won’t sell you licenses without one. It’s signed at the start of the relationship and applies to all your orders. Be sure to review or negotiate it, as it defines usage rights, audit rules, and other key terms applicable to every purchase.
Q2: What should we check in an Oracle ordering document before signing?
A: Make sure the order form reflects exactly what you negotiated. Verify that the product names and quantities are correct, the licensing metrics align with your understanding, and the pricing reflects the agreed-upon discount. Also, confirm that any special terms (such as a cap on future costs or additional usage rights) are clearly stated in the document. If it’s not in writing, assume it has not been officially granted.
Q3: Why are Oracle’s support fees so high, and can we reduce them?
A: Oracle’s annual support fee (22% of license cost) is significant, and Oracle is reluctant to reduce it. To control it, negotiate a cap on support fee increases when you first buy the licenses. Additionally, eliminate any unused licenses from your support contracts to avoid paying maintenance for software you’re not using. Some companies use third-party support for older systems to save money (but note you won’t get Oracle updates for those systems).
Q4: What happens if we don’t renew our Oracle support?
A: If you stop paying for support, you lose access to new patches, upgrades, and Oracle’s help, meaning your software will become outdated over time. Rejoining support later is extremely expensive (you’d have to pay all back fees plus a penalty). Generally, companies only drop Oracle support if they’re retiring a system or are sure they can run it without Oracle’s updates and assistance.
Q5: How can we prepare for an Oracle license audit?
A: Keep thorough records and do your internal audits. Maintain an inventory of all Oracle licenses you’ve purchased and compare it regularly to what is currently deployed. Use Oracle’s audit scripts to detect any usage of features or products you haven’t licensed, and fix those issues (either remove them or buy the needed licenses) before Oracle ever audits you. If you stay organized and compliant, an Oracle audit should hold no surprises.
Read an FAQ about Oracle support reduction.
