Oracle Enterprise licensing – common reporting issues

14 apr '16 - Richard Spithoven - share: LinkedIN Mail
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Oracle Enterprise License reporting seems straightforward. There are however a number of common issues. These and other potential causes of non-compliance will be addressed in our upcoming online expert session.         
 

Misinterpretation – The most common issues related to Enterprise License reporting are caused by misinterpretation of the contractual definitions, leading to inaccurate reporting of revenue or employees. For example, end-users who bought licenses on an Enterprise Employee metric with a standard metric definition only report the number of employees using the products. Instead they should report all ‘full-time, part-time, temporary employees, and all of your agents, contractors and consultants who have access to, use, or are tracked by the programs’, as the metric definition reads.

Actual numbers should be total – Organizations might restrict the reported actual numbers of users or the actual number of employees to those based in a specific country or registered under a particular subsidiary or headquarter. This represents a breach of the contractual obligations because products licensed on the Employee basis are to be measured as the total number of employees in the organization.

Territorial issues – Often, customers leave out entities that do not make use of the software, thus breaching the Territory clause in their license contract. Let’s look at the following example:

 

If the Parent Company is licensed under the Enterprise Employee metric, the following metric and end-user definitions apply:

Customer Definition – Products and services ordered under this agreement may be used by you and any entity that is not a competitor of Oracle, which controls, is controlled by or is under common control with you. An entity shall be deemed to be in control of another entity if (a) an entity directly or indirectly owns more than fifty percent of the voting stock of the other entity, or (b) an entity directly or indirectly possesses the power to cause or direct the management or policies of the other entity, provided that you warrant that you have the authority to bind such entities to the terms of the order and agreement and further warrant that you shall be responsible for a breach of such terms by such entities.

Enterprise Employee means (i) all of your full-time, part-time, temporary employees, and (ii) all of your agents, contractors and consultants who have access to, use, or are tracked by the programs. The quantity of the licenses required is determined by the number of Enterprise Employees and not the actual number of users. If you outsource any business function(s) to another company, the following must be counted in determining the number of Enterprise Employees: all of the company's full-time employees, part-time employees, temporary employees, agents, contractors and consultants who (i) are providing the outsourcing services and (ii) have access to, use, or are tracked by the programs.             

The value of program licenses is determined by the number of Enterprise Employees. For these program licenses, the licensed quantity purchased must at a minimum be equal to the number of Enterprise Employees as of the effective date of your order. If at any time the number of Enterprise Employees exceeds the licensed quantity, you are required to order additional licenses plus applicable technical support, so that the number of Enterprise Employees is equal to or less than the licensed quantity. You are not entitled to any refund, credit or other consideration of any kind if there is a reduction in the number of Enterprise Employees.  

Each year, 90 days before the anniversary date of your order, you are required to report to Oracle the number of Enterprise Employees as of such date.

In this case the end-user should report the total number of employees for all their four subsidiaries plus the Parent Company (even if not all the companies within the group use Oracle products) and also the number of agents, contractors and consultants who use, access or are tracked by the programs licensed on the Enterprise Employee metric.

Privately held companies need to report too – Another potential issue regarding usage reporting is related to companies that do not make their annual report public. Refusing to cooperate with an Oracle audit constitutes a breach of contractual obligations.

Termination can be tricky – Terminating a license means that the software involved must be removed from a customer’s systems. As a confirmation Oracle will require the end-user to sign a Termination Letter. License termination can be either partial or total. Alongside the Termination Letter, an Amendment to the Incremental License Fees/Expansion clause needs to be signed in order to have the fee per license increment and the support fee decreased, and have these recalculated only for remaining products.

There are cases when an end-user doesn’t use software products but doesn’t want to terminate them either. In such cases the licenses typically are used for extracting historical data, and not for production purposes. This however means that the contractual reporting obligations remain applicable.

No support doesn’t mean no license – Another issue is related to support. Some Oracle customers choose to discontinue support associated to their licenses and therefore think that reporting obligations cease to exist. Termination of support for Enterprise licensed products does not mean termination of licenses and end-users should be aware that they are still required to report their usage. Oracle can still audit an organization for the usage of such products, even though support has been terminated.

Make sure you have the right expertise                
You can of course invest in staff and building knowledge completely on your own to address the many software compliance issues you risk to face. 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.

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 -White Paper 

Oracle Enterprise Licensing – Taking It from the Start

Oracle Enterprise Licensing – The Expansion Clause

Oracle Enterprise Licensing – Incremental License Fees

 

 

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