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How to fight higher Oracle licensing costs in the AWS, Azure clouds

Oracle essentially doubled cloud licensing requirements to run its software on AWS or Azure, but Oracle shops can fight back. Here's how to avoid a bigger Oracle licensing bill.

In January, with little fanfare, Oracle doubled the number of processor licenses customers need when running a...

long list of its software in the Amazon Web Services and Azure clouds. To be more precise, what Oracle did was change a policy document that outlines its licensing rules for those platforms, amending how the required license count is calculated. Don't despair, though: Savvy users may be able to avoid any increases in their Oracle licensing costs.

Naturally, many Oracle customers are up in arms about the new cloud licensing policy, but no one should be surprised by it. Oracle uses its dominant position in the database market to try to drive users in the direction it desires them to go. In this case, the company wants customers to use its own cloud instead of the Amazon Web Services (AWS) and Microsoft Azure ones.

Oracle employed the same strategy after it acquired Sun Microsystems in 2010, increasing the license requirements for rival servers using new Intel Itanium chips -- in practice, systems made by what is now Hewlett Packard Enterprise. The strategy is brilliant. Rather than lowering its high prices, Oracle effectively increases the price of using its competition. Either way, Oracle wins. If you decide to run its software on another platform, you still must pay Oracle more money for the privilege. Well, in theory, at least.

Warning: Licensing audits likely ahead

The modified policy is so new that we at Palisade Compliance have yet to see it enforced by Oracle's License Management Services (LMS) audit team at any of our clients. However, if history is any guide and Oracle doesn't say otherwise, expect LMS to use the new rules when auditing customers. For example, let's say you bought and deployed Oracle software on AWS or Azure in 2016 under the old rules. Now the LMS team audits you. My guess is they will try to apply the new rules and require you to buy 100% more licenses. They'll probably also suggest that your issues would go away if you move to Oracle's cloud.

The question is, can Oracle really do this? And how can customers fight back against the prospect of higher Oracle licensing costs?

The first thing to note about this change, and your best line of defense, is that it is not in your contract -- and the policy that was changed specifically says so. "This document … provides guidelines regarding Oracle's policies," a footnote states. "It may not be incorporated into any contract and does not constitute a contract or a commitment to any specific terms." Oracle customers, specifically those who bought licenses for AWS or Azure deployments before the modifications took effect on Jan. 23, 2017, should use this as leverage when Oracle's auditors knock on the door.

Take the wheel on Oracle licensing

Even if you are in that group, make sure your organization is fully aware of Oracle's software licensing policies and the changes it makes to them. You should have a method to keep track of Oracle's policies and note when changes take effect. Oracle does a great job of documenting changes to its processor core factor table, which is used to calculate license requirements. So why isn't it as transparent about the history of Oracle cloud licensing changes? I think we all know the answer to that one. Once again, Oracle puts the burden of tracking such changes and complying with them on its customers.

Unfortunately, if you want to protect yourself from Oracle, you must take up this challenge and proactively manage your Oracle licenses. If Oracle starts asking questions or tries to audit you over an AWS or Azure installation, insist that the company gives you an affirmative statement upfront that it will continue to apply the old standards to your licensing requirements. Don't let Oracle do the audit and give you a big bill first, then argue with it about the policy. You'll be in a much better position to avoid an increase in your Oracle licensing costs if you take control of this process.

And what if you're looking to buy new cloud licenses from Oracle for AWS or Azure systems? Ask yourself if you'd be better served managing your existing Oracle licenses more efficiently so you don't need new ones. If that isn't possible, or if you're just moving to the cloud, you could also negotiate the old policies into a new contract. You do have good options available -- but only if you take control instead of ceding it to Oracle.

Next Steps

The risks of improper Oracle licenses

Are there restrictions when running Oracle on AWS?

The differences between Oracle on-premises and cloud licenses

This was last published in March 2017

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