Oracle Licensing

The Complexities of Oracle Licensing

Complexities of Oracle Licensing

  • Multiple license metrics (Processor, Named User Plus, etc.)
  • Complex virtualization and cloud licensing rules
  • Licensing minimums and matching support levels required
  • Features like RAC and Data Guard require additional licenses
  • Audits can uncover costly compliance gaps
  • Java licensing changes to per-employee model
  • Nuanced rules for development/testing, failover, and DR environments

The Complexities of Oracle Licensing

Oracle is the world’s leading database software provider and cloud computing services.

Many large enterprises rely on Oracle’s products to power their mission-critical systems. However, Oracle is also known for having one of the software industry’s most complex and potentially costly licensing models.

Navigating the intricacies of Oracle licensing can be daunting for even the most experienced IT and procurement professionals.

Misunderstanding or mismanaging your Oracle licenses can lead to unexpected costs, compliance risks, and tense relationships with Oracle.

This comprehensive guide will explore the key concepts, definitions, and rules governing Oracle licensing. By the end, you will have a solid foundation for optimizing your Oracle investments while staying compliant.

Oracle License Types

Oracle License Types

Oracle offers several license types that grant different usage rights:

  • Full Use License: Allows usage of the Oracle product without restrictions on functionality.
  • Application Specific Full Use License: This license is specific to run only with a defined application and may come with additional restrictions.
  • Embedded License: Limited to embed Oracle technology with a defined application and has further restrictions on installation, packaging, and access.
  • Restricted Use License: This license grants limited usage rights for specific purposes, such as backup and recovery and development/testing.

Understanding which license types apply to your Oracle products is the first step in ensuring compliance.

Perpetual vs Term Licenses

Oracle licenses can be perpetual or term-based:

  • Perpetual License: Provides the right to use the Oracle license indefinitely without expiration.
  • Term License: Allows use of the Oracle software for a limited term, typically one year. After expiration, a new term license must be purchased to continue using the software.

As of September 2020, Oracle has discontinued new term licenses for on-premise deployments, except 1-year term licenses for certain Oracle Technology products.

Unlimited License Agreements (ULAs)

Unlimited License Agreements (ULAs)

An Unlimited License Agreement (ULA) is a time-based contract that allows unlimited use of specified Oracle products for a fixed price, typically spanning 3-4 years.

At the end of the ULA term, the customer must declare their usage to Oracle and certify the required licenses going forward.

ULAs can provide cost predictability and deployment flexibility for organizations anticipating significant growth. However, they also require diligent tracking and governance to avoid overdeployment and ensure an accurate declaration at the end of the term.

Licensing Metrics

Oracle uses various metrics to determine the required number of licenses:

  • Processor: Based on the number of processor cores where the Oracle software is installed and/or running. Core processor licensing factors may apply.
  • Named User Plus (NUP): Based on the number of individuals authorized to use the Oracle software, regardless of actual usage. Minimums may apply based on the processor count.
  • Application User: An individual authorized to use the licensed application programs, regardless of whether they are actively using them at any given time.
  • Employee: Based on the number of full-time, part-time, and temporary employees and contractors with access to the Oracle software.

It’s critical to understand which metric(s) apply to your Oracle products and to have processes in place to track and manage usage accordingly.

Processor Licensing

When licensing Oracle software by the processor metric, you must count all processor cores where the software is installed and/or running. This includes physical servers, virtual machines, and cloud instances.

Oracle applies core processor licensing factors to determine the required number of licenses. These factors vary based on the processor type and are specified in the Oracle Processor Core Factor Table.

For example, suppose you’re running Oracle Database Enterprise Edition on a server with two Intel Xeon processors, each with ten cores and a core factor of 0.5. In that case, you must license 20 processor licenses (2 processors x 10 cores x 0.5 core factor).

It’s important to note that Oracle does not recognize soft partitioning technologies like VMware vCPUs as a means to limit the number of processor licenses required. You must license all physical cores on the server, even if the Oracle software only runs on a subset of those cores.

Named User Plus Licensing

Named User Plus Licensing

Named User Plus (NUP) licensing is based on the number of individuals authorized to use the Oracle software, regardless of whether they are actively using it at any given time.

The key points to understand about NUP licensing are:

  • Each named user must have a unique username and password to access the Oracle software.
  • Non-human-operated devices like sensors and bots must also be licensed if they access the software.
  • Minimums apply based on the processor count of the Oracle software servers. For example, Oracle Database Enterprise Edition requires a minimum of 25 NUP licenses per processor.

Tracking and managing NUP licenses can be challenging, especially in large organizations with fluid user populations. Tools like Oracle’s Identity Management can help automate user provisioning and de-provisioning.

Application User Licensing

Some Oracle applications use the Application User metric, similar to NUP but specific to the licensed application programs. An Application User is authorized to use the application, regardless of whether they are actively using it at any given time.

Application User licensing may have specific minimums and restrictions based on the particular Oracle application. It’s important to review the licensing terms carefully.

Employee Licensing

A few Oracle products are licensed based on the number of employees in the organization. This metric counts all full-time, part-time, temporary, and contractor employees who have access to the Oracle software.

The Employee metric can be advantageous for large enterprises that want to provide broad access to certain Oracle products without having to track individual usage. However, having an accurate employee count and communicating any significant changes to Oracle is critical.

Licensing Oracle in the Cloud

Licensing Oracle in the Cloud

Running Oracle software in the cloud introduces additional licensing considerations. The key points to understand are:

  • Bring Your Own License (BYOL): You can use your existing Oracle licenses in the cloud, but you must comply with the terms of your licensing agreement. This typically means licensing all physical cores on the Oracle software’s cloud instances.
  • Oracle Cloud: When running Oracle software on Oracle Cloud Infrastructure (OCI), you can use Oracle’s flexible “Pay As You Go” or “Monthly Flex” pricing models, which include the cost of the cloud service and the Oracle software license. Alternatively, you can use your perpetual licenses (BYOL) with OCI.
  • Amazon Web Services (AWS): On AWS, you can use your own Oracle licenses (BYOL) or purchase “License Included” instances that have the Oracle software pre-installed and licensed. With BYOL, you must license all vCPUs on the AWS instances, with a minimum of 4 vCPUs per Oracle processor license.
  • Microsoft Azure: You can use your own Oracle licenses (BYOL) or purchase “License Included” instances on Azure. With BYOL, you must license all vCPUs on the Azure instances, with a minimum of 4 vCPUs per Oracle processor license.

Carefully evaluate the cost and flexibility trade-offs between BYOL and cloud provider licensing options. Also, be aware of any restrictions on moving Oracle licenses between on-premise and cloud environments.

Licensing Rules for Virtualization

Oracle’s licensing rules for virtualization are notoriously complex and often misunderstood. The key points are:

  • Oracle does not recognize soft partitioning technologies like VMware vCPUs or Solaris containers as a means to limit licensing. You must license all physical cores on the host server, even if the Oracle software only runs on a subset of VMs or containers.
  • Oracle does recognize hard partitioning technologies like physical domains (LPARs) on IBM Power servers or Fujitsu’s PPAR. With hard partitioning, you only need to license the cores assigned to the partition running the Oracle software.
  • Oracle VM (OVM) has unique licensing rules. With OVM, you can license just the subset of physical cores allocated to the OVM guests running the Oracle software, subject to a minimum of 2 cores per guest.

Carefully assess your virtualization strategy and architecture to optimize Oracle licensing while maintaining desired flexibility and efficiency.

High Availability and Disaster Recovery Licensing

High Availability and Disaster Recovery Licensing

Licensing Oracle software in high availability (HA) and disaster recovery (DR) environments requires careful planning to ensure compliance and cost-effectiveness. The key considerations are:

  • Failover Environments: For certain Oracle products, your license includes the right to run the software on an unlicensed spare server for up to 10 days per year for failover purposes. Beyond this allowance, you must license the failover environment.
  • Standby Environments: Passive standby servers can be licensed at a 50% discount using Oracle’s Standby Perpetual Licensing. The standby server must meet specific requirements, such as remaining strictly passive and located in a separate data center from the primary server.
  • Data Guard: Oracle Data Guard is a common HA/DR solution for Oracle databases. With Active Data Guard, the standby database can be used for read-only workloads without additional licensing. However, if you use the standby database for other purposes (e.g., reporting, backups), you must license it fully.

Work closely with your technical teams and Oracle representatives to design HA/DR architectures that balance cost, compliance, and business continuity requirements.

Licensing Compliance and Audits

Oracle is known for its aggressive auditing practices. Non-compliance can result in significant unbudgeted costs, legal risks, and damaged relationships with Oracle. Some key points to ensure compliance are:

  • Maintain detailed inventories of all deployments of Oracle software, including on-premise, cloud, and hybrid environments.
  • Regularly review your Oracle license agreements and compare them to your deployments to identify gaps.
  • Establish processes to involve your software asset management and legal teams in any architectural changes or new Oracle software projects.
  • Proactively engage with Oracle LMS (License Management Services) to clarify any licensing questions and to stay ahead of potential audit activity.

If you receive an audit request from Oracle, engage experienced legal counsel and licensing experts to help navigate the process and negotiate any compliance issues.

Conclusion

Oracle licensing is a complex and high-stakes domain that requires a blend of technical, legal, and financial expertise to manage effectively. Understanding the key concepts, definitions, and rules covered in this guide, you’ll be better equipped to optimize your Oracle investments while minimizing compliance risks.

Remember, Oracle licensing is not a set-it-and-forget-it activity. It requires ongoing management, governance, and alignment between IT, procurement, legal, and finance stakeholders.

With the right mix of people, processes, and tools, you can turn Oracle licensing from a pain point into a source of strategic value for your organization. The key is to stay informed, engaged, and proactive in managing this critical aspect of your IT estate.

Here is a glossary of 200 key Oracle licensing terms used in the article:

  1. Full Use License
  2. Application Specific Full Use License
  3. Embedded License
  4. Restricted Use License
  5. Perpetual License
  6. Term License
  7. Unlimited License Agreement (ULA)
  8. Processor Licensing
  9. Named User Plus (NUP) Licensing
  10. Application User Licensing
  11. Employee Licensing
  12. Oracle Processor Core Factor Table
  13. Core Processor Licensing Factor
  14. Bring Your Own License (BYOL)
  15. Oracle Cloud
  16. Oracle Cloud Infrastructure (OCI)
  17. Pay As You Go
  18. Monthly Flex
  19. Amazon Web Services (AWS)
  20. License Included
  21. Microsoft Azure
  22. Soft Partitioning
  23. Hard Partitioning
  24. Oracle VM (OVM)
  25. Failover Environments
  26. Standby Environments
  27. Oracle Data Guard
  28. Active Data Guard
  29. License Management Services (LMS)
  30. Software Asset Management
  31. Processor
  32. Processor Core
  33. Processor License
  34. Named User Plus
  35. Employee
  36. Application User
  37. Minimums
  38. User Minimums
  39. Processor Minimums
  40. Processor Core Factor
  41. Failover Server
  42. Failover Environment
  43. Standby Server
  44. Physical Server
  45. Virtual Machine (VM)
  46. Cloud Instance
  47. vCPU
  48. Soft Partitioning
  49. Hard Partitioning
  50. Physical Domains (LPAR)
  51. PPAR
  52. OVM Guest
  53. High Availability (HA)
  54. Disaster Recovery (DR)
  55. Standby Perpetual Licensing
  56. Passive Standby
  57. Read-Only Workload
  58. Reporting
  59. Backup
  60. License Audit
  61. Compliance
  62. Non-Compliance
  63. Unbudgeted Cost
  64. Legal Risk
  65. License Inventory
  66. On-Premise
  67. Hybrid Environment
  68. License Agreement
  69. Actual Deployment
  70. License Gap
  71. Architectural Change
  72. New Project
  73. Audit Request
  74. Legal Counsel
  75. Licensing Expert
  76. Compliance Issue
  77. Negotiation
  78. Software Investment
  79. Compliance Risk
  80. License Management
  81. License Governance
  82. Stakeholder Alignment
  83. IT Estate
  84. Strategic Value
  85. Proactive Management
  86. License Metric
  87. User-Based Metric
  88. Usage-Based Metric
  89. Authorized User
  90. Unique Username
  91. Unique Password
  92. Non-Human Operated Device
  93. Sensor
  94. Bot
  95. User Population
  96. User Provisioning
  97. User De-Provisioning
  98. Identity Management
  99. Temporary Employee
  100. Contractor
  101. Cloud Deployment
  102. Cloud Service
  103. Pre-Installed Software
  104. Virtualization Strategy
  105. Virtualization Architecture
  106. Licensing Optimization
  107. Deployment Flexibility
  108. Operational Efficiency
  109. Guest Virtual Machine
  110. IBM Power Server
  111. Fujitsu Server
  112. Business Continuity
  113. Standby Database
  114. Read-Only Standby
  115. Passive Standby Database
  116. Data Center
  117. Aggressive Auditing
  118. Audit Practice
  119. Software Deployment
  120. License Utilization
  121. License Entitlement
  122. Effective License Position (ELP)
  123. License Reconciliation
  124. True-Up
  125. Annual Support Fee
  126. Technical Support
  127. Software Update License & Support
  128. Reinstatement Fee
  129. Lapsed Support
  130. Matching Service Levels
  131. Supported Platforms
  132. Unsupported Platform
  133. Desupported Release
  134. Upgrade Path
  135. Migration
  136. License Transition
  137. Contract Terms
  138. Use Rights
  139. License Restrictions
  140. Deployment

Citations:
[1] https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/1147375/2e1c415f-d463-4160-b0fe-42fc42e2509f/paste.txt
[2] https://redresscompliance.com/7-most-common-oracle-licensing-definition-and-rules/
[3] https://www.contractscounsel.com/t/us/oracle-license-and-services-agreement
[4] https://www.certero.com/data-center-sam-itam/certero-for-oracle/oracle-licensing-simple/
[5] https://www.oracle.com/a/ocom/docs/corporate/oracle-software-licensing-basics.pdf
[6] https://redresscompliance.com/oracle-term-license-benefits-and-key-information/
[7] https://www.insight.com/content/dam/insight/en_US/ips/pdfs/Lic_Definitions_and_Rules_v111815_US_ENG.pdf
[8] https://www.oracle.com/a/ocom/docs/license-definition-rules-v091120.pdf
[9] https://www.oracle.com/us/corporate/contracts/olsa-services/olsa-renewals-en-us-v053012-1867431.pdf
[10] https://www.linkedin.com/pulse/oracles-processor-licensing-definition-technically-flawed-inamullah
[11] https://www.oracle.com/us/corporate/contracts/lic-online-toma-ph-de-eng-3936865.pdf
[12] https://www.oracle.com/assets/databaselicensing-070584.pdf
[13] https://www.oracle.com/us/corporate/pricing/olsadef-ire-v122304-070549.pdf
[14] https://www.oracle.com/us/corporate/pricing/olsa-gr-v020703-070544.pdf
[15] https://www.oracle.com/us/corporate/pricing/olsa-ire-v122304-070683.pdf
[16] https://www.oracle.com/us/corporate/pricing/olsadef-gr-v020703-070599.pdf
[17] https://www.finops.org/wg/oracle-license-management/

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, enhancing organizational efficiency.

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