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Oracle-Sun deal could trigger Oracle license agreement inspections

Learn why the Oracle-Sun deal may trigger Oracle license agreement inspections, and get tips on Oracle contract management strategies from users and analysts.

With approval of the Oracle-Sun deal expected this summer, IT shops, particularly those with mission-critical products from both companies, are bracing for closer scrutiny of their Oracle license agreements.

"Oracle will use this merger as an excuse to revisit these contracts," said John Handy, a database administrator with a large Chicago-based financial institution.

"They did it after the PeopleSoft and JD Edwards deals," Handy said. "They'll come in to make sure you are not using more [Oracle] software than you should. And if you have Sun software, they'll start poking around that stuff too."

What adds to the drama of these visits by the vendor is the complexity of Oracle's licensing agreements. Too often, IT shops can't decipher exactly where the line in the sand is in terms of the number of software copies they are legally allowed to deploy.

"Oracle's software and maintenance deals can be so complex that it causes people to buy more software than they thought they were," said Gerry Scheider, a purchasing agent who works for a northern Virginia-based defense contractor. "I know we have been billed for some things we weren't aware were outside the contract."

An even more dangerous possibility in such conversations with Oracle is that the conversation could easily move from a routine review of proper software usage or Oracle maintenance levels to what amounts to an audit.

"This [Oracle-Sun] merger could spark other conversations with shops that may or may not have Sun boxes running in them, but Oracle won't know that when they start the conversation. Oracle could treat this as an opportunity to investigate a shop's hardware base and, without realizing it, users enter into an audit," said Jeff Greenwald, Acresso Software's senior director of product management for Enterprise licensing optimization. Acresso sells license management software.

According to Greenwald and others, because Oracle does not automatically lock out unlicensed use of its products, Oracle deployments can easily sprawl significantly beyond their legally entitled scope. It is this sort of overuse that is particularly problematic if and when an audit occurs.

Some analysts advise users with Oracle and Sun products to start planning their licensing and Oracle contract management strategies now, even though the deal is not approved.

"If you have a strategy that includes some of the Sun or open source components that have been acquired, you'll have to figure out what Oracle is doing with those components before you make your next move," said Ray Wang, vice president, principal analyst with Forrester Research, Inc. in Cambridge, Mass. "The problem is it is too early now, but you have to draw up some scenarios."

Wang suggests that if Sun users with contracts know they are going to stick with some of the company's products for an extended period, they should pursue the best deal they can get on a long-term contract. "It's likely you can get some great deals from the company being acquired right before [the deal] is approved. This might be a good time to buy," Wang said.

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Other analysts agree this might be an opportune time for Sun users to renegotiate their contracts to get themselves better deals. They caution that Oracle will be much more aggressive than Sun in enforcing the terms of contracts, particularly when it comes to maintenance.

But before renewing or having to adjust a software license or maintenance deal, Wang said, IT shops should carefully assess where they are in their lifecycle ownership of a product and whether they want to do further implementations or sunset it.

Major events such as major vendors or user organizations merging are not the only reasons for Oracle to pore over existing contracts. Reviews can be triggered by users' reorganizations, expansions, facility closings or layoffs, all or any of which can occur on a quarterly basis these days for larger companies.

Worse, IT shops are typically notified of such reviews on short notice, in many cases just two or three weeks. Even top executives can't alert their own IT professionals about certain important business changes that could trigger an Oracle review because of regulatory constraints.

For those shops with or without a dedicated license management strategy in place, hastily called reviews and audits can send an IT organization into a frenzied fire drill. That process could have IT personnel going manually through several server audit logs to see how many of their users are tapping into Oracle resources -- what features and options are being used -- and to determine whether the Oracle deployment is trending upward or downward.

Some IT professionals say this is hardly the sort of drill they have time for in environments where they are already under pressure to keep their daily operations moving forward with increasingly smaller budgets. "I have been part of these drills involving Oracle, CA and IBM before, and they can be a major pain in the ass," said one IT professional who requested anonymity.

"If you aren't prepared, it can put you behind by a few weeks on a project you have to drop in order to this. I don't need stuff like that in my life," he said.

What can make Oracle's licensing complex are the many instances of its products on multiple platforms, along with a rich array of options and entitlements. Even the way Oracle installs its software can further complicate how users can accurately track the active number of copies of a product in their shop. Oracle, unlike IBM or Microsoft, some say, plays by its own installations rules, offering no standard way to install the product.

"You can install Oracle any way you like on the box. There is no system record anywhere of where you put it, which is a problem. Often Oracle is installed, runs, and then that database instance is shut down, yet the software is still sitting there on the disk. Depending on how your contract is written, does that count as a license, the way you have it installed?" said Adam Kerrison, CTO of Tideway Systems in London, a company that makes software to help IT shops track instances of software on servers.

While more than a few users complain about what they feel is Oracle's overly aggressive policing of software and maintenance agreements, most agree they are no better or worse than their archrivals.

"I don't think Oracle is unique, other vendors like IBM and CA pull these audits. Oracle might get more bad press over it because they more aggressive and systematic," Kerrison said.

If a user organization has already licensed more software than it needs, then there's no reason for it to increase its Oracle budget following an acquisition. However, if that organization under-subscribed, then it is unlikely to be in any position to negotiate with Oracle about a price break because it has downsized. But license management plays a role in the ability of IT to appropriately respond to business change, Acresso's Greenwald said.

Greenwald also points out that not only can Acresso's license management software provide IT shops with detailed information about how many instances of Oracle software they have and where they are located, but the company can help prepare clients for contract negotiations with Oracle.

"We can give them the information and recommendations in order to make decisions," Greenwald said, "and what they should say to Oracle when it comes time to renegotiate contracts."

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