Researcher: Oracle Playing Hardball In Corporate Licensing Audits

Oracle

The database giant has gone into a handful of large accounts and "reinterpreted the language of their contracts" to force additional payment for the use of software already covered by existing licenses, said Meta Group analyst Mark Shainman. The Meta Group has received calls from several corporate customers who said they had been approached by Oracle last quarter for "random licensing management services," he said.

At issue is multiplexing, an environment in which software such as a Web server or a Transaction Processing (TP) monitor uses a shared pool of connections to a back-end database. That setup "masks the actual number of users" that connect to a given database and requires companies to either license the database on a per-processor basis or pay for all the users at the front end of the multiplexing software, according to the Meta report, titled "Oracle Multiplexing Causing User Apoplexy."

Shainman said it appears that Oracle went into large accounts and extended the definition of multiplexing to include large "batch" feeds from non-Oracle back ends into its database. "So an operational system with hundreds of front-end users doing transactions on an IBM mainframe--which might have done a once-a-week bulk load into the data warehouse--would have to pay for all those hundreds of front-end users of the mainframe or alternatively convert to the per-processing model," he said.

The fee changes could result in millions of dollars of additional charges for such customers, Shainman said. He and other industry analysts also report an increase in the number of Oracle audits in the last two quarters and attribute the move to the vendor's need for more revenue.

"Last year, it was rare that we ever saw an audit, and now we have these random licensing management service audits," Shainman said. "What this says to me is that instead of Oracle out there being able to sell new licenses, they have to go into existing accounts and derive additional revenue."

In a statement responding to The Meta Group report's claims, Oracle said that if one of the company's databases is licensed in an automated environment, then all devices need to be licensed.

"Typically, in such cases, the number of devices may be so high that licensing by processor makes economical sense for the customer," the company statement said. "Oracle treats any batch process as a multiplexor. And customers can license the database by processor--therefore licensing the whole batch process--or they can license the database by named user." In the latter case, all users at the front end of the batch process must be licensed, according to the company.

Oracle said it hasn't increased the number of audits in past years and has just 24 people who conduct audits in the United States and Canada--a head count that hasn't risen in five years.

Oracle's new license sales for its third quarter ending last month were down 30 percent, and Oracle CFO Jeff Henley said last week that he expects the downward trend to continue in the fourth quarter.

"We will assume things aren't getting any better. We feel license growth will be very similar [to this quarter: negative 25 percent to negative 30 percent. And based on that, earnings [may be down 1 cent to 2 cents from last year," Henley said last Thursday during an earnings call with financial analysts.

Asked about the issue of aggressive auditing during last week's call, Henley said Oracle's license-compliance program is ongoing. "There's nothing different. Enterprise software is tricky, and customers sometimes lose track of usage. We try to help customers stay in compliance. Many times, they invite us in because they realize they don't know. I hate to use the word 'audit.' It's a review."