Oracle ULAs Require Delicate Balancing

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201512.27
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Oracle ULAs Require Delicate Balancing

Many larger companies feel an understandable desire to move toward, centralized, enterprise-level software licensing agreements. Such frameworks often have the advantage of allowing licensees to spread their license spends more evenly over the term of the agreement and to focus somewhat less intensely on some software asset management (SAM) obligations.

In that vein, Oracle offers its Unlimited License Agreement (ULA). The ULA is unique among the licensing arrangements offered by some of its competitors, in that it gives the licensee the right to deploy the products specified in the ULA on an unlimited number of processors and in that it contains no end-of term true-up obligation – as the ULA expires, the company will hold a quantity of processor licenses equal to the number of processors on which the ULA Programs are deployed, as certified by the licensee. If the company is able to accurately forecast its needs and to effectively negotiate a good initial license and support payment under the ULA, it has the opportunity to acquire a surplus of licenses relative to needs by the end of the term.

However, there is a significant potential downside to the ULA: Forever following the end of the ULA term (unless a new agreement is negotiated with Oracle), the annual technical support fees for all programs licensed under the ULA will be no less than the annual fee paid for those programs immediately prior to the end of the ULA term (in most cases, this would be equal to the annual support purchased at the beginning of the term). If the company does not accurately forecast its needs or if the initial license and support payment exceeds the company’s end-of-term needs – for example, if there is a sharp business downturn that results in a much reduced need for ULA-licensed products – then the cost of maintaining support for programs included in the ULA following the term could be significantly higher than the costs that would have been incurred if no ULA had been signed.

For this reason (among others), a company considering entering into a ULA needs to have mature and proven internal SAM capabilities. It also needs to be able to predict steady growth over the term of the ULA with limited divestments. If it can do that, then the ULA can be a justifiably attractive licensing option. However, if any pieces of the SAM puzzle are missing, then the principal long-term effect of the ULA could be a severe headache for IT and procurement teams.