Finding your (Oracle) software balance

Purchasing software licenses is not just a matter of price since there also is a price to the management of the license. What to consider? Companies should manage their software licenses to ensure that they comply with specific software contracts. In order to manage software licenses effectively, resources, tools and knowledge, are required. Knowing exactly what a grant entails as well as the company’s software consumption is essential.

In addition to paying for software, managing licenses costs money since a company has to invest in resources, tools and knowledge. Take, for example, Oracle. Our experience shows that a company’s software budget should reserve 3-5% of Oracle’s annual support fee to cover management costs.

Why are cheaper software licenses more costly to manage?

It is common to reduce the price of software by adding more restrictions. As with other vendors, Oracle prices its products according to software restrictions (terms & conditions). Software publishers do this with the same product in order to remain competitive in different areas of the market. In this way, new product propositions can be launched. For example, as a product edition (Enterprise, Standard edition), a license metric (Processor, Named User Plus), as license levels (Full Use, ASFU, Embedded), but also by offering various contracts (ULA, SLSA) and distribution rights (customer definition).

Restricted licenses or less flexible contracts are cheaper but cost more to manage due to restrictions, whereas flexible licenses or contracts have fewer restrictions and cost less to manage. For example, Oracle application specific licenses (obtained via third party application resellers) may cost less, but in order to manage and comply with these licenses more expertise and knowledge is needed. This means the company has to invest money in resources and know how.

Rates, the number of restrictions, and management costs are all interrelated. The cost of license/support, however, and the cost of license management, is not linearly dependent. You can decrease license management costs by agreeing to fewer restrictions.

The majority of these restrictions are technical. You are not allowed to use certain functions or are not permitted to access software with certain devices. Technical data and knowledge is required to stay within these restrictions. Managing licenses can be complicated since not all data is easy to extract and process.

Enterprise or a standard edition?

The Oracle Database Enterprise Edition (EE) is the most commonly used database edition although a number of enterprise edition environments are perfectly capable of running a Standard Edition (SE). But by choosing to run an SE edition, a less expensive edition than the EE, means managing more restrictions which in turn poses optimization issues. For example, you are not allowed to run certain management packages using the SE database edition. Oracle SE also has hardware restrictions in which no more than four sockets on a machine are allowed. Something to keep in mind when replacing a machine three years later. A mistake can be costly to rectify.

How to decrease your company’s software license costs

A company’s monitoring resources and budget play an important role when making software decisions. Some companies struggle to manage restrictions internally and can only handle licenses with minimal restrictions and simple metrics. Other companies do not want to be bothered with managing licenses and opt for the least restrictive contracts. The Unlimited License Agreement (ULA) is a perfect example; an agreement with hardly any restrictions when it comes to technically deploying software. But ULAs are expensive and the contract is for a period no longer than three to five years. Companies still have to implement internal cost allocation as well as analyze the company’s software consumption.

Find your balance

Unfortunately, a simple solution or standard optimization advice does not exist. It all depends on the company’s needs and the company’s resources and budget for managing these licenses. Just as it is important to maintain a healthy balance in life, finding the balance between simpler license management, cost control, in-house expertise and the right external support, is essential for a healthy license position.

On Jan 9, 2013 this post was published on the iQuate blog.

Mark co-founded B-lay in 2008 and is the company’s managing director since then. Additionally, to his managerial role, Mark is using the extensive software compliance knowledge he gathered since 1997 to help organizations worldwide get insight into the risks associated with using and managing their software licenses, as well as preventing compliance issues and save costs. This is also strongly visible in the Zyncc product line of B-lay. Prior to founding B-lay, he was responsible for all compliance activities in Europe, Middle East and Africa at Oracle. This included building the foundation for what now is the global Oracle License Management Services (LMS) team and onboarding the many acquisitions Oracle made over the years into the compliance program of Oracle.

Mark holds a bachelor’s degree in Company Economics and IT from Hogeschool Enschede in the Netherlands.