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Making the wrong Oracle license management decision can have a multi-million dollar financial impact. Out of the licensing models that Oracle offers, the ULA can have the most impact on a customer’s long- term Oracle spend. Despite this financial influence, the ULA is often misunderstood. By becoming better informed about what an Oracle ULA is, you’ll be able to determine whether or not an ULA makes sense for your organization’s needs, and drive stronger value from your Oracle investment.
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Even if the name suggests otherwise, the Oracle ULA is limited and one of those limitations is also time bound. In our previous article we started to discuss the options that you have at the end of a ULA agreement: renewing or certifying the ULA.
When considering if ULA renewal is a viable option, it is important to determine your future license requirements. For example, if you transition from on premises deployments to a (public) cloud provider like Amazon EC2 or Microsoft Azure, there will be a period of time in which there will be an increased license requirement. During the transition period - in which the Oracle programs are installed both on premises and in the (public) cloud - Oracle requires you to license each (virtual) server on which the Oracle programs are installed and/or running.
There are of course different cloud solutions that you want to evaluate before transitioning to the cloud. Publishers like Oracle are trying to influence your decision in their favor, by making their public cloud solution commercially more attractive than their competitors’ solutions. They do this by applying different terms and conditions for different cloud providers and by introducing new commercial models. Oracle introduced its “ULA 2 Cloud” program, but what does this actually mean and how does it work?
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1. Under-Deployment
You may end up overpaying for actual usage if one of the following circumstances occurs:
- Estimated growth (e.g. of users, product usage) that was forecast when the ULA was signed does not materialize, resulting in surplus licenses.
- The predicted use of certain products does not turn out as expected, and such products ultimately end up unused.
If under-deployment is an issue, you can end up paying for additional ULA licenses. Even if the ULA is exited, under-deployment will remain an issue, unless new demand for the under-deployed or unused products arises. This means that your stable support stream can become a substantial financial burden.
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2. Support Costs
At the start of your ULA, support for existing licenses previously purchased on a transactional basis will roll into a single support contract. This causes current Customer Support Identifiers (CSIs) to terminate, with the ULA licenses grouped into a single CSI. Although a single CSI can simplify ULA support management, you also lose the flexibility of being able to drop support for unwanted licenses.
Per Oracle’s support policy, a support repricing on the remaining licenses is triggered when support is reduced. This means that even if you have fewer Oracle licenses, you’ll still be paying the same amount for support.
Pro Tip: Avoid being stuck on one CSI by proactively negotiating for multiple CSIs on the ULA with Oracle. An understanding of how Oracle’s internal approval structure functions can help an organization achieve this result.
But What Exactly is a ULA?
Although the name suggests differently, a ULA is not completely unlimited. The limitations of the ULA are governed by the clauses included. Whilst the starting point will usually be the Oracle standard ULA with standard clauses, it is possible to agree to include deviations from the standard and/or non-standard language. This results in specific terms and conditions between your own organization and Oracle. These may include clauses to cap the support maintenance increase during the term of the ULA (also known as Technical Support Cap) which as a standard would otherwise increase with 3-4% year over year, clauses to allow usage of the ULA programs up and until a certain threshold after a merger or acquisition (e.g. maximum of 10% growth in terms of employees and/or revenue), clauses that allow a divested entity to make use of the ULA programs for a grace period of 6-12 months, a ULA Certification floor to guarantee a minimum amount of licenses upon certification, and many more.
Conclusion
Many organizations are in the process of defining their cloud strategy. The question usually is not if they will move to the (public) cloud, but when they will do so and what cloud provider should they choose. In order to determine the best option, companies should at all times determine their requirements from a functionality, performance and security perspective.
Your transition to the cloud should always starts with having a complete and accurate understanding of the deployment and use of your software programs as well as the associated licensing terms. Once this is clear, it is important to investigate what licensing models are available and the cost of the models offered by different cloud vendors.
Be aware that repurposing your technical support fee(s) for the use of Oracle Cloud Services can have an impact on your total costs. Making an informed business decision based on facts requires expert knowledge which we could help you with.
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ULA Certification Process
The ordering document of each Oracle ULA includes the following standard certification clause:
" . Certification Process
On the Certification Date (or Accelerated Certification Date (as defined below), if applicable), You shall furnish Oracle with a certification signed by a C-level executive of Your company verifying the quantity of Processors on which the Unlimited Deployment Programs are installed and running by You and the locations by country where such Processors are installed and running (with the numbers of Processors of each Program per country specified). As of the date on which the Unlimited Deployment Period ends (such certified quantity, the “Certified Deployment”). On the date the Unlimited Deployment Period ends, Your quantity of Processor licenses of the Unlimited Deployment Programs above shall be fixed and limited as set forth in the Certified Deployment. . "
As a result of this contractual clause, you should be aware of the fact that it is your responsibility to count the deployed number of Processors and/or Application User licenses (depending on the Oracle programs and their associated license metrics included in your ULA) at the end of your ULA term. It is important that you prepare the complete and accurate count of the deployment of your Oracle programs well in advance (we suggest 6 months before the expiration of your ULA) to make sure that you do it correctly.
An incorrect count of the deployed licenses will either mean that you counted too few licenses, resulting in a non-compliance situation upon certification, or that you counted too many deployed licenses, which is considered a breach of your agreement and fraud under international IP laws. Because mistakes can be easily made in counting the deployed licenses in a complete and accurate manner, Oracle requires a C-level representative of your organization to sign off on the number of licenses you are submitting for certification. If and when Oracle accepts the certified number of licenses, they will be granted as perpetual licenses against the same support maintenance fees as were paid for the ULA programs. Thus, in a standard ULA, there is no additional license and/or support fee to be paid at the end of the ULA, regardless of the number of certified licenses.
Repurpose Technical Support
In case you enter into a standard Unlimited License Agreement, you will pay a license fee (CAPEX) and the associated support maintenance fee (OPEX). The ULA 2 Cloud program results in a situation where you get the option to “repurpose” your support maintenance fee. What does this mean?
During a defined period of time (the so called “Repurposed Support Period”) you are allowed to repurpose (or convert) the technical support fee to its equivalent Oracle Cloud Service (e.g. Oracle IaaS or Oracle PaaS Cloud Services). Be aware though this doesn’t apply to all Oracle programs, but only to the support fees paid for the use of on premises Oracle licenses included in your ULA. The programs which you are allowed to convert are called “Eligible Programs” and the order through which you convert parts of your technical support fee into its equivalent Oracle Cloud Service is called an “Eligible Cloud Service Order”.
Repurposing your technical support fee can be done by executing a Eligible Cloud Service Order, but only as long as
- the Cloud Service is obtained for at least one year and the Cloud Service chosen is made available for production use (to avoid that end users are repurposing technical support for Cloud Services that Oracle may make available in the future)
- the repurposed support fee shall not be more than 50% of the total Cloud Services order (in other words, you need to additionally pay 50% of the total cloud fees at all times)
- the amount of repurposed support may cumulatively (i.e. across all Eligible Cloud Service Orders) not exceed the lesser of either:
- a) the net total support fee paid for the Oracle programs which are eligible and part of your ULA, or
- b) the net total license fee paid for the Oracle programs which are eligible and part of your ULA.
At the end of the period in which you are entitled to repurpose your technical support paid for your on premises licenses to Oracle Cloud Services (the end of the Repurposed Support Period) you are NO longer entitled to repurpose your annual technical support for Cloud Services. The amount of the repurposed support will become (again) part of your total technical support fees paid for your (on premises) ULA programs.
Exit with Success! How to end your Oracle ULA without unnecessary costs.
Daniel Meier
Daniel joined the USU in 2017 as a Bid Manager and was involved in solution designs for customers. Since 2019 he is one of the USU account managers and supports our customers with his expertise.
Many companies entered into an Unlimited License Agreement (ULA) with Oracle, and if you’re one of them, you might want to read on to learn what are your options at the end of the agreement. Although the name may make you believe that you can unlimitedly deploy Oracle software programs within your infrastructure, a ULA provides you with the unlimited deployment right for a limited amount of Oracle programs, for a limited amount of legal entities and for a limited period of time.
At the end of the ULA term (usually 1-5 years after the signature date), you’ll be faced with the option to renew the ULA for another period of time (e.g. 1 - 5 years or perpetual), for a different or the same number of legal entities and for less, the same or more Oracle programs than the original ULA. Alternatively, you can certify the ULA. More details about what that means and how the standard procedure that you have to follow during the ULA certification process looks like are covered in this article.
Oracle ULA Risks
An ULA can pose risks that may significantly outweigh its benefits, if the ULA is not managed correctly:
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Oracle License Management Services (LMS) is the department that performs audits on behalf of Oracle. LMS typically starts to engage with a customer 3 months before the expiration of the ULA. During their engagement, Oracle LMS positions themselves as the friendly advisor supporting you in counting the deployment of your Oracle programs in a complete and accurate manner. In order to do so, Oracle LMS will use its LMS Collection Tool which includes a number of queries and scripts for gathering the deployment and usage information from your infrastructure.
Although such support may be handy to rely upon, you should be aware that this LMS Collection Tool will also gather deployment and usage information related to other Oracle programs which may NOT be part of your Unlimited License Agreement. It is very common that the use of the LMS Collection Tool will not only result in a certification of your ULA but a license compliance claim as well. 98% of technical measurements of the deployment and usage of the Oracle programs result in a non-compliance issue. Think for example about the unlicensed usage of database options and/or database management packs found to be deployed on your VMware infrastructure.
Once all the deployment and usage information related to the Oracle programs is collected, Oracle LMS will want you to complete an .xls file called “Global Deployment Report” or “GDR”. This excel sheet is completed manually by yourself or is populated by Oracle in case the LMS Collection tool is being used. GDR provides an overview of the deployed Oracle programs and the associated hardware infrastructure details. All the details included in this GDR are analyzed by Oracle LMS to validate the completeness and the accuracy of the information provided. This validation will either be continued until Oracle considers it has a complete and accurate understanding of your deployment, or it will be used to prove that you are unable to correctly manage your Oracle licenses. The latter scenario is typically chosen to convince an end user to enter into a new Unlimited License Agreement. This new ULA may or may not include the Oracle programs of the previous ULA as well as all additional programs found during the technical measurement.
4. ULA Certification
The ULA certification itself may pose its own risks for customers:
- If you don’t track and actively manage a ULA deployment, you’ll end up having to conduct an inventory, which can be very time consuming and be expensive in terms of human capital.
- The certification is carried out by License Management Services (LMS), Oracle’s audit arm. This means that you can think of the certification process itself as a mini software compliance audit. During this process, you may be asked to run the same measurement scripts that LMS uses during its audit, and the outputs can be used to build a compliance case. If compliance issues are discovered, the ULA may be renewed as a solution, which may not have been the original goal. This means you run the risk of being locked into a less favorable contract.
- Depending on the certification terms, cloud deployment of the ULA licenses may not be eligible for certification. This means that you could be out of compliance once the ULA ends if it lacks the licenses necessary to cover its cloud deployment.
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An Example to Make this More specific
An end user enters into a 2-year ULA for a Net License fee of USD 10 M and an associated annual net support maintenance fee of USD 2.2M. The total costs in the first year would then be USD 10 M Net License fee + USD 2.2 M Net Support fee.
In the second year of the ULA, the end user decides to start using Oracle Cloud by making an investment of 500K USD in Cloud Services as well as to repurpose 500 K USD of the annual support maintenance fee for Cloud Credits. The total costs in the second year would then be USD 2.7 M, consisting of USD 2.2 M for 2nd year support (assuming that no support indexation is applied) + USD 500 K. Apart from the benefits of technical support, the end user would receive a value of USD 1.0 M Cloud Credits, consisting of USD 500 K repurpose of support + USD 500 K new investment).
In case the consumption of the Cloud Credits remains stable, the end user is no longer eligible to repurpose technical support in the 3rd year after signing the 2-year ULA. The total costs in the third year would thus be USD 3.2 M, comprised of USD 2.2. M for 3rd year support (assuming that no support indexation is applied) plus USD 1.0 M USD to cover the total consumption of the Oracle Cloud Services.
Conclusion
Although you may think that you won’t have any compliance issues because you entered into an Unlimited License Agreement, many organizations with a ULA are found to be non-compliant during their ULA certification process. This is usually caused by the deployment of Oracle programs which are not part of the ULA, or deployment of Oracle programs by legal entities which aren’t included in the ULA. In case you decide to certify your ULA yourself, without involvement of Oracle LMS, you might notice that you’ll struggle with counting in a complete and accurate manner, which can result in an incorrect ULA certification. Having Oracle LMS involved may result in entering a new ULA, rather than certifying the expiring one.
We recommend our customers to perform an internal measurement and certification process well before the ULA expires. If your ULA will expire in the coming 6 months, you’ll want to start looking into your Oracle programs deployment situation.
ULA Ordering Document
Since you’re now past the introduction, we’ll assume you’ve already entered or are considering entering into a ULA for your organization. The first thing you should be aware of is that the contractual document through which you obtain the Unlimited Deployment Rights is actually an ordering document. This ordering document is at all times referring to a specific license agreement called Oracle Master Agreement (OMA). The license agreement itself specifies the general terms and conditions that are applicable for any order of licenses, support, hardware and/or cloud that you may execute against this agreement. Think for example about the audit rights applicable to the programs included in your ULA ordering document. It is therefore important to maintain and administer the ULA ordering document and the associated license agreement to obtain a complete and accurate picture of the rights and obligations you contractually agreed upon.
ULA – Evaluate Pros and Cons
An Unlimited License Agreement may be a very valuable solution for your enterprise at a certain moment in time. The downside of a ULA is the “lock-in” from a technical support perspective, since you lose the possibility to terminate the support maintenance for a license if and when such license is no longer required. Before entering into an Unlimited License Agreement, it is important to have a clear view of all the contractual clauses that are part of the agreement. Each individual organization should evaluate if the pros of an Unlimited License Agreement outweigh the cons for its specific situation.
3. Oracle Compliance
Even with an ULA in place, Oracle license management is still needed for Oracle deployments. Many customers may have a false impression of deployment rights with an ULA. It’s important to clearly understand which licenses are on the ULA and their associated quantities to avoid deploying their licenses incorrectly, e.g. deploying licenses not on the ULA, or over-deploying quantity-based licenses.
Close coordination between the IT and Software Asset Management (SAM) teams will help you stay compliant, protect against a software compliance audit, and avoid additional license and support costs. Determine what exactly is in use and how much is being used by conducting an accurate environment assessment. Doing so can help identify potential issues before the end of your ULA term, and result in significant cost avoidance.
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Approximately 15 years ago, Oracle Corporation introduced its Unlimited License Agreement (ULA). This type of license agreement was designed for larger enterprises that don’t want to have to count the required number of licenses on an ongoing basis and for enterprises that want to have clarity upfront on their net license and support fees for the coming years. Since its introduction, many end user organizations entered into such an agreement. Reasons why end users entered into a ULA vary. Maybe Oracle proposed a ULA as a commercial resolution for an identified large non-compliance resulting from an audit. Or an enterprise expected to require a large amount of additional licenses for the deployment of Oracle and wanted to have upfront clarity on the associated license and support costs. There can be many other reasons for enterprises to enter into a ULA.
Exiting an ULA
If you’re planning to certify and exit an ULA, it’s crucial to prepare for the certification prior to the ULA end date.
Depending on the size of the ULA footprint, the process of assessing the deployment and addressing identified issues will need to start months beforehand to ensure that there is enough time for all compliance issues have been addressed.
Understanding the benefits and risks of an ULA is crucial to helping determine if an ULA makes sense for your organization’s needs, both in the short and long term for overall Oracle license optimization. If an ULA and its license deployment are properly managed, you can gain a lot of value. However, an Oracle ULA can also end up costing you more than if you had purchased on a transactional basis.
Because the long-term effects of an ULA are substantial, it’s best practice to enlist the support of an Oracle license management team familiar with Oracle’s ULA practices to conduct an assessment and cost-benefit analysis. Engaging such an Oracle licensing specialist can give you the information needed to ensure you get the most value from your Oracle investment.
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Oracle ULA Benefits
So, why would you choose an ULA? The Oracle ULA is a smart option if you expect high growth over the course of the ULA term. There are four key reasons you might select an Oracle ULA:
- Predictability: Your license and support costs are fixed for the term of the ULA.
- Standardization: Architectural costs are reduced as the ULA often retires third party niche products.
- Design Flexibility: Your architecture is no longer constrained by software unit cost. This translates to a faster time to market, increasing innovation and agility while making it easier to allocate DR, secondary data centers, and multicore processors. LOBs can also choose the right business solutions to meet their needs without worrying about the license and support fees involved.
- Productivity: You won’t need to request additional budget during your ULA term. As a result, Oracle license management time is reduced and efficiencies are improved such as:
- Architecting
- Negotiating
- Requesting funding for identified projects and/or unforeseen projects
- Monitoring the deployment
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What is an Oracle ULA?
An Oracle ULA is an “unlimited license agreement”. This time-based agreement usually is set for three years. For a fixed license and support fee, an ULA gives you the right to use an unlimited number of licenses for a specific set of Oracle products. ULAs may also include a combination of unlimited and quantity-based licenses. When the ULA term expires, you have two options:
- Renew the ULA for another term, and make any necessary changes to the license configuration.
- Exit the ULA and certify license usage to determine how many licenses to keep moving forward.
Once license usage has been certified, you will get the rights to perpetual licenses for the usage that has been declared. If you’re found to be compliant, no additional license fees will be required.
However, although additional support fees are not required upon certification, Oracle’s standard 3% Inflationary Adjustment Rate (IAR) will apply. Since ULA support is based on the ULA license fees, your support stream will remain the same regardless of how many (or few) licenses are deployed. This means that it may be challenging to make changes to a support stream if usage of the ULA licenses decreases.
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