Filed under: IT Financial Management, Negotiations, Oracle, Risk Mitigation, Service & Support, Software, Total Cost of Ownership
It appears Oracle has increased its due diligence in the area of auditing customers. On the one hand, this exercise may be helpful (as Oracle will profess) in enabling customers to better understand holistically precisely what their entitlements are and to what degree those entitlements are being leveraged. This is useful information that many customers often struggle to reconcile on their own, and could shed some light on where opportunities for downsizing of entitlements might occur.
On the other hand, customers should be cautious. In a down economy, where the volume of deals and overall license spending is lower than desired, auditing is a means by which Oracle may be hoping to find opportunities for incremental licensing events. Especially for customers who either may not have been positioned to actively keep track of utilization trends over time, or who may not be familiar with original agreements and the parameters of utilization in these agreements, Oracle will be seeking to capitalize whereever possible to bring your license entitlements and utilization back into compliance.
Resolving compliance issues is likely to be done through a new licensing event. Unlike a situation where a customer may be giving Oracle an opportunity to earn additional licensing business via a purchase that is not the result of an existing contractual obligation to Oracle, it is more challenging to negotiate a favorable license arrangement to adress compliance matters. In fact, with certain product families, it is likely that the costs associated with the need to add incremental licenses has already been identified. With other product families, Oracle is likely to use its standard list pricing as a starting point, and given that the absence of the licenses constitutes a breach of contract in a compliance situation, they are not under as much pressure to discount. This puts the customer at a disadvantage, not only as it relates to the new license cost, but the associated maintenance costs related with those new licenses too – as the maintenance and support services costs are generally based on the net license value.
Customers would be well advised to invest time in assessing their license entitlements and utilization, and truly ensuring the parameters of their licenses are well accounted for, in advance of Oracle aggressively pursing completion of an audit. If misalignment is identified, and you find that you will require additional licenses to ensure your utilization needs are met into the foreseeble future, it is better to address that with Oracle proactively with bringing a new license opportunity to them. Given the possible stakes, this may be an area where enlisting professional help may be a worthwhile investment to either a) ensure you have no exposure; or b) help you address any potential exposure in a way that is most optimal for your organization.
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