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Being Compliant is the best way to Fight an Oracle Audit

Thought-Leadership by Brian Lowinger
on March 10, 2016

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Mars’ recent lawsuit against Oracle is a tangible example on how Oracle audits its customers. In summary, Mars complained that Oracle’s demands were over-reaching, without contractual merit, and damaging to Mars’s business. Those of us who specialize in Oracle-related software asset management and audit remediation found the Mars situation to be unexceptional with respect to Oracle’s audit practices. However, what is unique about the situation is that Mars chose to enter the public arena through litigation, and Oracle allowed the matter to escalate that far. Another plot-thickener is recent and compelling commentary by House of Brick and others on how many of Oracle’s policies (and especially its VMware “policy”) fall outside contractual terms and are therefore unenforceable.

Although you may be inspired to follow Mars’ example, there are two important things to consider before going head-to-head with Oracle in court:

  • Oracle owns its software and alone determines how it may be used, priced, and audited.

  • Oracle is immeasurably prepared to defend its view of intellectual property rights.

Given these two points alone, our recommendation is to understand and comply with Oracle’s policies before being audited, even when they seem impractical and baseless. Perhaps the folks at Mars would agree, since they likely ended up paying at least as much in legal and settlement fees as they would have had they foregone litigation and negotiated a license agreement with Oracle from the outset.

While it’s tempting to challenge Oracle’s licensing policies, in our experience it isn’t particularly fruitful. Even under the most customer-centric (i.e., anti-Oracle) interpretation of contractual rights, one must contend with Oracle’s pricing practices, which are inarguably under its control. Oracle need only withhold discounts on its software to make license and support costs punitively high. Anyone with experience negotiating a license order or attempting to reduce existing support costs understands this. Bluntly stated – Oracle’s dominance, profitability, and leverage are largely due to its pricing latitude in combination with its inflexible support policies and unnavigable licensing rules, and these forces can’t be undermined by taking Oracle to court.

Excellent Software. Strict Compliance Policies.

While we don’t dispute that Oracle publishes great software, its greatest innovation are the policies that all but ensure eventual compliance violations and lock customers into paying high-margin, perpetual support fees. In fact, our first step with customers seeking advice on how to reduce their Oracle spend is to analyze the degree of flexibility that exists within their contracts. Policies such as matching support and re-pricing have varying degrees of grip on Oracle customers. In many cases, that grip is so tight that a complete sweep of Oracle’s products is required for meaningful long-term cost reduction. Given that Oracle software is often not easily replaced, an entire rip and replace is far more costly.

For the rest, Oracle is constantly seeking to secure long-term profit by pitching multi-year renewal commitments, ULAs, and other arrangements designed to ensure revenue for years to come. At SoftwareONE, we believe many customers have the potential to break Oracle’s hold and save money long term without taking Mars’ bold, but risky, approach.

To summarize, butting heads with Oracle is likely not your best option. For more advice about managing your relationship with Oracle, click on the banner below to contact one of our licensing specialists.

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