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Proprietary applications a risk without right Oracle licenses

It's easy to end up in compliance hot water when developing an application for external use on an Oracle platform. Identify proprietary hosting before violating your Oracle software licenses.

Developing a custom application that runs on an Oracle platform and is aimed at end users outside your organization...

can easily become dangerous financially. As soon as the application is accessed by an external user audience, the chances of running into an Oracle software-license compliance issue skyrocket. In the worst-case scenario, you could end up having to double the number of your Oracle licenses as well as pay fines to the vendor.

Oracle considers this type of environment -- a self-hosted software as a service offering, for example -- to be a proprietary application hosting deployment. Hosting setups for proprietary applications are not covered under the current terms and conditions on the standard Oracle contract, even under an Oracle Unlimited License Agreement (ULA).

If you want to use your application in this manner, you'll most likely have to acquire a proprietary hosting license. They're essentially the same Oracle licenses that the vendor normally offers, but the wording of the contract is changed to specify that they're for third-party organizations offering proprietary applications. The alteration to the license is negotiated at the time of a software purchase, and the software being licensed can only be used for application hosting -- nothing else, including use by internal employees.

To determine if your enterprise is indeed in a proprietary hosting situation, you need to consider three questions:

  1. Does the application developed by or for your company use an Oracle asset, such as Oracle Database? In other words, is it a homegrown initiative with an Oracle foundation?
  2. Is the application used by an external audience? And is its usage a one-to-many scenario? If so, you may be using the Oracle platform properly under a single standard license -- but as more and more people outside the company start using the application, it can start requiring more and more Oracle licenses to cover them all. 
  3. Is the application internet-based? While not all proprietary hosting scenarios involve internet-based applications, a large portion of them do.

If the answer is yes to these questions, you may have a license compliance issue on your hands if you haven't purchased a proprietary hosting license.

It's not just Oracle

Oracle isn't alone in its insistence on proprietary application hosting licensing. Microsoft has its own version of a proprietary hosting license for independent software vendors (ISVs) that want to offer their applications as hosted services. Similar to Oracle, Microsoft has specific licensing requirements for ISVs running self-hosted applications, as it calls them. Those requirements differ from the standard licensing provisions for applications intended for use by a company's internal workforce.

Many organizations believe that the hosting of proprietary applications is covered by their current Oracle contract's terms and conditions, but that's not true. Even Oracle's standard ULA, which provides unlimited Oracle licenses for a flat, upfront fee, doesn't cover the proprietary hosting scenario. Changing a contract to a hosting license gives an Oracle user the right to deliver its application service or technology to multiple external customers and protects its own licensing model from the possibility of Oracle demanding additional payments.

Not quite proprietary hosting

If you answered yes to most of the questions above, but said no to having an external user base, then you aren't facing a proprietary hosting license situation. Oracle is very clear that in order to qualify, you need to have multiple external parties with access to an application. That's even the case with development and test applications: They aren't client facing, so they don't have an external audience accessing them. Proprietary hosting deals only with applications that your customers can use.

However, companies running nonproduction demo servers where clients can try out a product or service are categorized under the proprietary hosting license scenario because it's a one-to-many deployment with external-user access. Even if an application is in a beta test or trial setting, as long as there are external users accessing it, you'll need to license your Oracle software appropriately.

In addition, the external parties don't have to be a company's end clients to trigger the proprietary hosting license requirement. External one-to-many user access can arise from situations such as a business-to-business network involving multiple companies, an Oracle Enterprise Manager services provider or a third-party providing the application to other companies or individuals.

In order to comply with Oracle on the hosting of proprietary applications, the first step is to complete a registration form that the vendor makes available. In it, Oracle asks for a description of the application, the Oracle platform it's running on and details pertaining to the planned use of the application. This form will allow an organization to obtain and use a proprietary hosting license, but only in the ways outlined by Oracle.

Wayne Federico is the CIO and vice president of technical services at Miro Consulting Inc. 

Next Steps

Microsoft offers Oracle users free licensing for SQL Server

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This was last published in June 2016

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What Oracle licensing issue concerns you the most?
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Do we have to pay any license for downloaded Oracle products?
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Hi, gamasibu. If you mean downloading Oracle products for developing and prototyping applications, or just for educating yourself on the technologies, then no -- software downloads are free for those purposes. Oracle typically won't provide tech support or product updates for such downloads, though. And your  organization would have to buy Oracle licenses to actually put any systems and applications into use.
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