Oracle Enterprise licensing – the expansion clause
A proper understanding of the Expansion Clause constitutes the foundation of controlling costs and being compliant with the terms of your Oracle Enterprise License Agreement (ELA). The Expansion Clause provides organizations with all details regarding the additional fees they are required to pay if the reported quantities exceed the licensed quantities. This clause contains three major pillars:
- License Base: total number of licenses that your company owns;
- License Increment: additional licenses needed in case of additional usage;
- Fees per increment: for licenses and support.
When an organization (‘end-user’) purchases Oracle products under an Expansion Clause, the initially purchased quantity represents the so-called License Base. Usually, increases in license quantity will be calculated as 10% of the initial quantity. On this basis, Oracle will establish the incremental license fee and the incremental support fee.
For example: If an end-user purchases Oracle Financials with the metric Enterprise $M in Revenue and a quantity of 200, this quantity is the License Base and in a standard license agreement the License Increment quantity would be 20.
The Incremental Step or License Increment represents a fixed number of licenses set in the Expansion Clause that an end-user will have to purchase in case the License Base is exceeded. The difference between the current usage and the License Base determines how many increments an organization needs to purchase. In case of a fraction (e.g. 2.5 Incremental Steps) the total will be rounded up to the next whole number of steps.
For example: An end-user purchased Oracle Financials on the metric Enterprise $M in Revenue and a quantity of 100; the Incremental Step is Enterprise $M in Revenue 10; and the end-user reports Enterprise $117M in Revenue after one year. In this case the difference is 17 which equals 1.7 Incremental Steps. This means 2 increments since additional licenses can only be bought in whole numbers.
Fee per Increment
The actual fee an organization will need to pay for 1 Incremental Step if the current usage exceeds the License Base is called Fee per Increment. There are two types of incremental fees a customer needs to pay in case of a license expansion. One is for licenses and the other for support. As per Oracle’s standard, the support fee will be 22% of the net license fee.
Make sure you have the right expertise
Judged by key metrics like Enterprise Employee, Enterprise $Million in Revenue and $Million Revenue under Management, Oracle Enterprise Licensing looks very simple. In reality the proper application of the Expansion Clause raises many complexities
You can of course invest in staff and building knowledge completely on your own. But you might also want to consider enrolling in a fully operational license management program. This can be done in less than three months and will be tailored to the specific demands of your company.
Download Our Free White Paper:
Oracle Enterprise Licensing - A detailed overview of how it works
If you are in need of extra expertise and a structured approach, feel free to contact B-lay. We will help you make software compliance an exciting opportunity to improve your business!
Other articles in this series:
Oracle Enterprise Licensing – This Is How It Works
Oracle Enterprise Licensing – Taking It from the Start