Oracle Faces Withering Criticism of Its Licensing Practices

Licensing software at the enterprise level is rarely a simple undertaking. Unless your company is big enough to demand custom licensing terms, most businesses will face the prospect of contending with license metrics that may work great for the software publishers, but that are difficult or impossible for the licensee to apply in a resource-effective way. In addition, the cost of mistakes in this area can be very high, taking the form of audit fees and unanticipated license expenditures.

No software publisher in my experience has a uniformly amicable licensing and compliance practice, but some companies deserve special attention for the depths to which they appear to be willing to sink their customer relationships. Oracle is one of those publishers.

In November 2014, the Campaign for Clear Licensing (CCL), a UK-based organization advocating reforms to software-licensing practices, published the results of a survey finding amazingly high levels of frustration among Oracle software licensees arising out of the company’s licensing and audit practices. One of the report’s take-aways was a finding that Oracle’s relationships with its customers are “predominantly hostile and filled with deep-rooted mistrust.” The CCL followed up that report with an open letter to Oracle CEO Larry Ellison on January 6, 2015, emphasizing the survey findings and urging Oracle to take action to salvage its reputation among its customers with clearer and less adversarial business practices. Both the report and the letter have received substantial attention in software-licensing circles.

As an attorney representing companies facing Oracle audits and compliance challenges, my experience is entirely consistent with CCL’s observations. While Oracle does not use a dizzying multitude of license metrics like some publishers (notably, IBM), its products nevertheless can be amazingly difficult to license “correctly,” due in no small part to the many supplemental licensing and support policies that control how Oracle products and services may be used. In addition, in audits, Oracle’s License Management Services (LMS) organization typically fails to provide meaningful visibility into the audit process, preferring to hide its work until the time comes to surprise the audit target with a compliance demand bearing a price tag that almost always exceeds expectations.

Oracle would do well to heed the CCL’s advice, though I am not holding my breath. Audits are a profitable source of revenue for most publishers. While improved customer relationships could bear fruit in the long term, it may be difficult for a publisher in Oracle’s position to prioritize that goal when an aggressive compliance practice can produce more immediate gains in a competitive marketplace. Until customers start walking away loudly and pursuing alternatives that carry less risk and administrative burden, I would not expect Mr. Ellison to make any substantive changes.