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Oracle tells its customers that they may be breaking their licensing rules

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February 24, 2016

Over the past few months, Oracle has been telling a number of its customers running its database software that they could be breaking the company's licensing rules, and therefore owe it millions of dollars in unpaid licence fees.

This development hit the headlines in January after U.S. confectionery company Mars took Oracle to court over claims that Mars had broken Oracle's licensing rules.

The case was settled even before going to trial. Experts calculated that had Oracle won, Mars would have been in the hole for about $100 million.

And that’s on top of an existing annual Oracle software bill of another $100 million. Oracle has even gone to several other big customers with similar claims with up to 5 times that figure.

One contact at a major channel reseller partner told us he is encountering more and more customers running virtual machines being charged by Oracle for their entire estate.

However, not all Oracle database users are at risk. It’s those running Oracle’s premier database in conjunction with VMware’s virtualization software. Given VMware is the largest virtualization platform and that Oracle is the single largest relational database provider, the space for conflict in this V-style overlap is massive.

The reason Oracle is targeting the VMware segment of its business is that Oracle simply doesn't accept VMware’s world view on licensing, and therefore its definition of hardware partitioning.

To be sure, an Oracle partitioning document reveals that Oracle only accepts Solaris Containers, IBM’s LPAR and Fujitsu’s PAR. VMware is not on the list of hard partitioning partners.

Since VMware’s release of vSphere 5.1 in August 2012, Oracle has insisted that you cannot simply license its database to a given number of virtual machines. Rather, you must license your entire server estate, on the basis that you have the potential to run Oracle on all those servers and cores, should you wish.

And it’s a rule with very massive ramifications for how much you pay Oracle. Richard Spithoven, partner of license management expert B.lay says that customers should be under no illusions when it comes to running Oracle: it’s the database provider that dictates the licensing practices and Oracle can change the contractual rights when new technologies emerge, like when VMware moved to vSphere 5.1 in 2012.

Spithoven says he has seen claims of more than $500 million by Oracle in the past two years. Martin Thompson, founder and chairman of the Campaign for Clear Licensing says-- “Licensing Oracle on VMware is a very grey area. Oracle likes this greyness in its licensing practices since it allows it to prop up flagging sales numbers with audit revenue. If not prepared, Oracle customers using VMware will find themselves being out of luck via licensing terms that are not defined or agreed.”

Needless to say, the financial impact on organizations can be devastating, especially for smaller companies that don't have large IT budgets. It can even put them out of business permanently.

VMware's vSphere 5.1 is four years old, but cases like Mars and others are only now coming to the fore as existing license deals with Oracle come up for renewal and renegotiation.

Additionally, Oracle customers are jumping on the cloud and therefore virtualizing machines using VMware and therefore suddenly leaving themselves completely exposed to Oracle. There could be many more sad stories that could be in the development stage.

Often, system admins in IT departments that buy and run Oracle’s licensing agreements aren’t up to speed on the nuances of Oracle’s complex licensing terms, or are simply unaware of the hard partition rules.

Carl Davies, TmaxSoftware's U.K. managing director said late yesterday-- “This is obviously very perplexing and it isn’t surprising that some customers are accusing Oracle of promoting misuse of its software to then report that same customer to be out of compliance.”

Those kinds of numbers can’t just be whipped up from some budget somewhere: they will give the CFO a huge headache and they will most likely make a dent in the quarterly performance of any publicly-traded company.

No wonder Mars went to court and no wonder Spithoven expects others will also fight back. The financial impacts here can be huge to say the least.

Spithoven added-- ``The IT industry is maturing and Oracle clients get more knowledgable and better prepared. They will no longer accept everything Oracle does and with Oracle taking a larger footprint in corporate IT department thanks to its numerous acquisitions, the financial claims are getting bigger.``

Source: Tmax Software.

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