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Oracle Licensing: 5 Common Types of Database Licenses

Oracle offers enterprises many licensing options for its database products. Choosing the right license type for your technical, user and budgetary requirements can be challenging to say the least. This has led many customers to overbuy and overspend on Oracle licensing as well as unintentionally expose their Oracle software estates to compliance risk.

Here are some of the most common types of Oracle database licenses consumed by enterprise customers.

Oracle Database Licensing Types: Understanding 5 Common Licensing Types

#1 – Cloud BYOL (Bring Your Own License)

As more companies migrate to the cloud, the BYOL Oracle licensing model has gained significant steam among enterprise customers. This licensing model allows customers to utilize their existing on-premise Oracle license to support their Oracle migration and deployment to the cloud. For some customers, the BYOL option delivers material cost savings.

BYOL can be used whether you’re looking to run Oracle in Oracle’s own cloud infrastructure (OCI for short) or in a competitive cloud hosting environment like AWS or Azure. For customers looking to migrate their legacy Oracle system to OCI, existing perpetual software licenses can be used to purchase a cloud subscription at a lower cost.

Likewise, customers can use their existing Oracle licenses to run on AWS or Azure – although it’s important to understand usage rights, core multiplier calculations and specific licensing metrics in order to avoid risk of noncompliance. For example, many Oracle ULAs do not allow usage in AWS.

Advantages

• Often delivers material savings
• Aligns with most enterprises long-term cloud migration strategy

Drawbacks

• Potential for noncompliance if not careful
• TCO can be complicated to determine and customers need to consider full cost of cloud commitment versus cost of buying a license outright

#2 – Processor Licensing

Oracle offers processor licensing in the event users can neither be counted nor verified. In this case, pricing is calculated per processor. However, Oracle has a specific definition of what a processor is, which may or may not remain congruent with the definition used by your hardware vendor.

For example, with a Standard Edition 2 (SE2) license, a processor is defined as equivalent to a socket (as are all products with Standard Edition in the name). Alternatively, if you have multi-chip modules, each chip is defined as equivalent to a socket. Note – if you’re still using an SE1 or SE license and haven’t migrated to SE2, things get a little more hairy on the compliance front.

Popular demand for processor-based licenses stems from web applications in which counting your users across hosting environments is challenging. Therefore, to calculate your licenses, this metric allows you to multiply the total number of cores of the processors used by a single licensing factor. For easy reference, the core processor licensing factor is specified on your Oracle Processor Core Factor Table, located in your contract’s terms and conditions.

Advantages

• You don’t have to count users
• Optimal for web applications
• Simplicity

Drawbacks

• There are several nuances per product
• Requires accurate processor calculation
• Complex contract language might result in misinterpreting license metrics

#3 – Named User Plus

This license type is most commonly used in development and testing environments. Instead of pricing on a per processor basis, Named User Plus licensing is charged per user. In this case, Oracle defines a user as any human, system (e.g., scanning robot, information board, and application servers), or other “end-node” that either receives or creates data from an Oracle database.

One caveat with the Named User Plus licensing metric is that you must adhere to the Oracle User Minimums rule as part of this license. Named User Plus licenses, like all license types referenced here, are available for all Oracle database editions.

Advantages

• Multiple editions are available to better suit your licensing needs
• Adequate room for license negotiation and optimization

Drawbacks

• If the application server is connected to the outside world via a web application, you must buy processor-based licenses unless otherwise negotiated with proof that only a few users have access
• Must have a minimum number of named users to the Oracle software

#4 – Application-Specific Licensing

Another option in the Oracle licensing portfolio is application-specific licenses. These are sold in tandem with third-party application packages – and there a ton of third-parties that sell them. For example, enterprises can purchase an Oracle application-specific license from SAP that allows them to use Oracle with SAP’s systems. As a result, this particular license pertains to application-specific metrics and cannot be used for anything else.

Because these licenses are provided as part of a third-party application, the third party is responsible for technical support. In effect, customers must rely on the third party to stay on top of all patches and updates issued by Oracle.

Advantages

• More necessity than advantage – application-specific licenses allow Oracle’s products to connect with other enterprise application in the IT ecosystem
• Less expensive than Oracle’s full-use licenses

Drawbacks

• Restricted use only for application specified
• Compliance risk for customers that don’t fully understand application-specific use rights

#5 – Unlimited License Agreement (ULA) 

Oracle’s Unlimited License Agreement (ULA) permits unlimited use rights covering certain subsets of Oracle products within a specified timeline agreement – all for a single fee. At the close of their ULA period, customers go through a true-up exercise where they declare their usage of products to Oracle. This includes the number of user licenses needed during the specified period. Customers are then granted the licenses by Oracle.

ULAs are best for companies expecting growth through normal business operations rather than through mergers and acquisitions. They also allow you to bundle a collection of Oracle products together within a single agreement and get a single invoice instead of managing several complex licensing agreements for each product and multiple invoices.

However, ULAs can lock customers into subpar terms and pricing thereby creating a subpar baseline for future renewals. It’s advisable to perform IT price benchmark analysis on all pricing and discounts, and negotiate best-in-class terms that provide flexibility to meet your current and future-state requirements.

Advantages

• Cost savings by bundling products
• Convenience as a “one-stop-shop”
• Simplicity by having all licenses in one agreement

Drawbacks

• Putting all your eggs in one basket
• Must have aggressive negotiations for favorable pricing and terms
• Unbundling can be a future issue

Don't Forget to Negotiate and Optimize Your Oracle Licensing Agreements

The Oracle sourcing environment has always been tough to navigate, especially when you don’t know what elements are negotiable. By default, most IT sourcing teams have limited transactional exposure with Oracle – typically just once every year or two. When negotiating your Oracle licensing terms, it’s important to have expert help to reduce costs across all facets of your Oracle estate. This equips Oracle customers with the knowledge gained from frequent, regular transactional exposure.

If you are looking to reduce your software licensing costs, renew or make a net-new purchase with Oracle, NPI can help. Our price benchmark analysis, license optimization, and software license audit services frequently deliver six and seven-figure savings for enterprise clients.

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