Are Oracle unlimited license agreements really unlimited?

Oracle’s unlimited license agreements (ULAs) have become more popular, extending beyond the company’s largest clients and becoming a way to simplify the complex licensing maze. But there are still plenty of caveats, including what exactly “unlimited” means.

Negotiating with Oracle on licensing can be difficult, end users say. For example, one customer has an existing agreement with Oracle that licenses according to processor count. But the agreement was signed before AMD and Intel started producing chips with many cores. Now, Oracle wants to license according to its core factor licensing scheme. But the end user argues that at the time of the agreement, the core factor scheme wasn’t even in place.

“You have a genuine problem there, where you have language that is obsolete,” said Duncan Jones, a Forrester analyst who recently wrote a report on Oracle’s unlimited license agreements. “But the customer wants the option of whether it likes the latest language or not.”

The potential benefits of unlimited license agreements are cost and convenience. Oracle shops can get an array of Oracle products bundled together under one agreement and one bill, rather than a mishmash of complex licensing agreements for each product. The drawbacks are putting all your eggs in one basket and needing to make sure you negotiate the terms aggressively. Don't just assume that “unlimited” means, in fact, unlimited.

“You also have to come up with what-if scenarios for many years into the future, and some businesses aren’t able to predict months into the future, never mind years,” said Eliot Arlo Colon, president of Woodbridge, N.J.-based software licensing firm Miro Consulting.

Colon said Oracle started offering its biggest 100 clients unlimited license agreements about six years ago. One of the early adopters was the federal government. Steven Pavick, a chief systems engineer for the Air Force Logistics Transformation Office, said they operate under ULAs because of the more than 250,000 anticipated users over the life of the agreement. He said they went with ULAs four years ago as part of the government’s acquisition strategy.

But over the last couple of years, Oracle started opening up the offer to its next 1,000 or so largest companies. Colon said the agreements are best for companies that expect growth through normal business operations rather than through mergers and acquisitions.

Why is that? Because, depending on the language of the terms, the unlimited license agreement won’t apply. Oracle shops might encounter problems after signing the agreement because they didn’t notice some restrictions in the contract, or the wording wasn’t precise enough. As a result, ULAs might not apply for external users of Oracle products. For example, Jones said he worked with one North American public utility that ran into that very issue -- who could use the software. It was for internal use only.

“That was an example of where the clients didn’t truly have an unlimited license,” he said.

Jones added that the most important thing end users must do is closely examine the language of an Oracle unlimited license agreement, just as they would any contract, and not assume that “unlimited” means unlimited. Colon agreed, adding that the company must also decide whether it really wants to go with an “all Oracle, all the time” approach.

“You’re tying in products where Oracle is best of breed and others where Oracle is not,” he said. “You’re investing in Oracle across the board.”

Oracle declined comment for this story.

Mark Fontecchio can be reached at [email protected].