Oracle Licensing

What is Oracle Licensing? A Comprehensive Guide

What is Oracle Licensing

  • Legal agreement governing the use of Oracle software
  • Specifies license types (e.g., Full Use, Embedded) and metrics (e.g., Processor, Named User Plus)
  • Outlines usage rights and restrictions in the Oracle Master Agreement and Ordering Documents

Introduction to What is Oracle Licensing?

Introduction to What is Oracle Licensing?

Oracle is one of the world’s largest software companies, offering various products, including databases, middleware, applications, and cloud services.

Customers must comply with Oracle’s licensing rules to use Oracle software legally.

Understanding and managing Oracle licenses is crucial for organizations to ensure compliance, control costs, and make informed decisions about their software investments.

Oracle Licensing Basics

Oracle’s software licensing gives customers a non-exclusive, limited right to use the software. The key components of Oracle licensing include:

  • License Types: Outline the usage restrictions, such as Full Use (no restrictions), Application Specific Full Use (limited to a defined application), or Embedded (limited to embedding with a defined application).
  • License Metrics: Determine how software usage is measured, such as Named User Plus (per user), Processor (per processor), or custom application metrics.
  • License Term: Provides the timeline for usage, either perpetual (use indefinitely) or term-based (fixed period). As of September 2020, Oracle ended the availability of term licenses for most on-premises software.

Oracle’s licensing is governed by the Oracle Master Agreement (OMA), which contains the general terms and Ordering Documents that specify each order’s products, quantities, and metrics.

Oracle Technology Licensing

Oracle’s database and middleware products primarily use two licensing metrics:

  1. Processor: Based on the number of processor cores where the software is installed and/or running. All cores must be counted and multiplied by a core processor licensing factor.
  2. Named User Plus (NUP): Based on the number of individuals authorized to use the software, regardless of whether they are actively using it. Minimums apply per processor.

Processor licensing, such as web-based applications, is used when users cannot be easily counted.

NUP is used when users can be identified and is often more cost-effective. It’s important to consider the hardware on which the software is deployed.

Oracle applies a processor core factor that varies by hardware type and must be used to determine the required number of processor licenses.

Oracle Applications Licensing

Oracle Applications Licensing

Oracle’s business applications use more diverse and flexible licensing models:

  • Component Pricing is based on user or usage metrics, such as Employees, Application Users, or Revenue. It allows a la carte purchasing.
  • Custom Applications Suite: Bundles multiple products into a custom suite with a single metric, typically Named Users.
  • Enterprise Pricing: Enterprise-wide metrics like revenue are used for unlimited use within the organization.

Applications licensing offers more flexibility to mix and match models but also requires careful management to avoid unexpected costs.

Licensing Oracle in the Cloud

Running Oracle software in the cloud introduces additional licensing considerations. Oracle’s cloud licensing policy allows using existing licenses in authorized cloud environments like Oracle Cloud, Amazon Web Services, or Microsoft Azure.

However, the required licenses may be calculated differently than for on-premises deployments. In the cloud, processor licenses are based on the number of virtual CPUs (vCPUs) rather than physical cores.

It’s critical to carefully review the licensing rules for each cloud platform and work with Oracle and licensing experts to ensure compliance and optimize costs.

Common Pitfalls and Best Practices

Common Pitfalls and Best Practices

Oracle’s complex licensing rules and evolving policies make it easy for organizations to unintentionally fall out of compliance, leading to costly audit findings. Some common pitfalls include:

  • Virtualization: Deploying Oracle software on VMware or other virtualization platforms without understanding the licensing implications. Soft partitioning is not a means to limit the licenses required.
  • Disaster Recovery: Failing to license standby or backup environments. All servers installed with Oracle software must be licensed, with only limited exceptions.
  • User Minimums: Not meeting the minimum NUP licenses required per processor, even if actual usage is lower.

To mitigate these risks, organizations should:

  1. Conduct regular internal license audits to identify any unlicensed usage.
  2. Provide training and establish policies to ensure awareness of licensing rules.
  3. Use tools to track and optimize license usage across the IT environment.
  4. Partner with experienced Oracle licensing specialists for guidance and audit support.


Oracle licensing is a critical aspect of using Oracle software that directly impacts an organization’s IT budget, operations, and compliance.

Understanding Oracle’s license types, metrics, and agreement structures can help customers make informed decisions and minimize risks.

However, Oracle’s licensing is complex and ever-changing, so organizations must diligently monitor their usage, stay current with policies, and engage licensing expertise.

Investing in effective license management is essential to achieving the full value of Oracle investments while avoiding costly compliance issues.

With a solid grasp of the fundamentals and a commitment to ongoing license management, organizations can confidently navigate Oracle’s licensing landscape and optimize their use of these powerful software products.


  • 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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