Oracle term license ends for most on-premises programs

Oracle TERM License

  • Definition: A type of Oracle software license
  • Duration: Limited to a specific period (1 to 5 years)
  • Access: Grants temporary access to the software
  • Cost: Lower upfront cost, based on a percentage of the perpetual license price
  • Support: Annual technical support cost is 22% of the perpetual license fee

Oracle TERM License vs. Oracle Perpetual License

Oracle TERM License vs. Oracle Perpetual License

Oracle offers two types of software licenses: TERM and Perpetual. Understanding the differences between these licenses and the changes in Oracle’s licensing policy is crucial for organizations managing Oracle software.

This article will explain the distinctions between TERM and Perpetual licenses, Oracle’s recent policy changes, and how organizations can navigate these options.

The Basics

Oracle Perpetual License

  • Duration: Indefinite
  • Access: Grants perpetual access to the software
  • Cost: Typically, higher upfront cost
  • Support: Ongoing technical support available (typically 22% of the perpetual license fee annually)

Oracle TERM License

  • Duration: Specific period (previously available in 1 to 5-year terms)
  • Access: Grants access to the software for a limited time
  • Cost: Lower upfront cost (percentage of the perpetual license price)
  • Support: Technical support is available and costs 22% of the perpetual license fee annually

Key Changes in Oracle TERM Licensing

Before September 1, 2020, Oracle offered TERM licenses for one to five years for most of its on-premises programs. However, as of September 1, 2020, Oracle stopped selling TERM licenses for most on-premises programs. Oracle now only offers one-year TERM licenses for a limited number of “Technology programs.”

Detailed Comparison: TERM vs. Perpetual Licenses

Cost Structure

TERM License Cost:

  • One year: 20% of the perpetual license list price
  • Two years: 35% of the perpetual license list price
  • Three years: 50% of the perpetual license list price
  • Four years: 60% of the perpetual license list price
  • Five years: 70% of the perpetual license list price

Perpetual License Cost:

  • One-time fee: Full list price
  • Annual support fee: 22% of the perpetual license fee

Example Cost Calculation

Assume the perpetual license for an Oracle product costs $100,000. The TERM license costs would be as follows:

  • One-year TERM: $20,000
  • Two-year TERM: $35,000
  • Three-year TERM: $50,000
  • Four-year TERM: $60,000
  • Five-year TERM: $70,000

Licensing Changes and Their Impact

Licensing Changes and Their Impact

Discontinued TERM Licenses

As of September 1, 2020, Oracle discontinued TERM licenses for most on-premises programs. The exceptions are specific “Technology programs,” for which Oracle will continue to sell one-year TERM licenses. These programs include:

  • Oracle Database:
    • Oracle Database Standard Edition 2
    • Oracle Database Enterprise Edition
    • Various Oracle Database Enterprise Edition options (e.g., Oracle Active Data Guard, Oracle Advanced Compression)
  • Oracle Middleware:
    • Oracle Forms & Reports
    • Oracle Internet Application Server Enterprise Edition
    • Oracle WebLogic Server Enterprise Edition
    • Oracle WebLogic Server Standard Edition
    • Oracle WebLogic Suite
  • Oracle Data Integration:
    • Oracle Golden Gate
  • Oracle Exadata:
    • Exadata Storage Server Software

Implications for Organizations

Existing TERM Licenses

Organizations with existing TERM licenses will continue receiving support until their term ends. These organizations must plan for the future, especially if they need to renew or transition their licenses.

Infrastructure Changes

TERM licenses can be particularly relevant during infrastructure changes, such as upgrading hardware or migrating from on-premises to the cloud. In such scenarios, Oracle software might be installed and used on the old and new infrastructure for a limited time, necessitating TERM licenses.

  • Dual Use Period: If the migration involves Oracle programs for which only a one-year TERM license is available, the end user must complete the infrastructure change within that one year.
  • Perpetual Licenses: If TERM licenses are unavailable for certain programs, end users must purchase more expensive perpetual licenses for the current and new infrastructure.

Non-Compliance Resolutions

TERM licenses have historically been used to resolve non-compliance issues during Oracle audits. If an end-user was found to be non-compliant due to unintended use of Oracle software, they might purchase a retroactive TERM license for the period of unlicensed use. With the new policy:

  • Short-Term Compliance: One-year TERM licenses might still be used for non-compliance resolutions.
  • Long-Term Compliance: End users must purchase perpetual licenses or enter into an Unlimited License Agreement (ULA) for compliance issues extending beyond one year.

Oracle TERM License FAQ

Q: What are Oracle TERM licenses?

  • A: TERM licenses allow users to access Oracle software for a specific period rather than indefinitely.

Q: What programs are still eligible for TERM licenses?

  • A: TERM licenses are available for a limited number of Oracle Technology programs, including certain Oracle Database, Middleware, Data Integration, and Exadata programs.

Q: What happens to organizations with existing TERM licenses?

  • A: These organizations will continue receiving support until their TERM ends.

Q: Why did Oracle stop selling TERM licenses?

  • A: The exact reasons are unclear, but Oracle likely aims to encourage users to switch to perpetual licenses or cloud-based offerings.

Q: How can organizations license Oracle software if TERM licenses are no longer available?

  • A: Organizations can use perpetual licenses or Oracle’s cloud-based offerings. They should review their needs and budget to determine the best option.

Q: Can organizations negotiate for a two or three-year TERM license?

  • A: While not on the price list, organizations can negotiate directly with Oracle for multi-year TERM licenses.

Practical Scenarios and Solutions

Scenario 1: Infrastructure Change

Situation: An organization is upgrading its hardware and temporarily needs to use Oracle software on both old and new systems.

Solution:

  • One-Year TERM License: If applicable, use a one-year TERM license for the transition period.
  • Perpetual License: Consider purchasing perpetual licenses if a one-year TERM is insufficient or unavailable.

Scenario 2: Audit and Non-Compliance

Situation: An Oracle audit reveals unintended use of software over the past three years.

Solution:

  • One-Year TERM License: Resolve short-term non-compliance with a one-year TERM license.
  • Perpetual License: For longer periods, negotiate a perpetual license or ULA to cover the unlicensed use.

Conclusion

Oracle’s licensing options, particularly the shift from TERM to primarily perpetual licenses, require careful consideration by organizations. Understanding the differences between TERM and perpetual licenses and the recent changes in Oracle’s licensing policy is essential for effective software management and cost optimization.

Recommendations

  1. Review Licensing Needs: Regularly assess your organization’s software usage and future requirements.
  2. Plan for Transitions: Develop a strategy for infrastructure changes and software migrations.
  3. Stay Compliant: Monitor software usage to ensure compliance with Oracle’s licensing policies.
  4. Consult with Oracle: Engage with Oracle representatives to explore licensing options and negotiate terms that best suit your organization’s needs.
  5. Consider Cloud Solutions: Evaluate Oracle’s cloud-based offerings as a potential alternative to traditional on-premises licenses.

By staying informed and proactive, organizations can effectively navigate Oracle’s licensing landscape, ensuring they meet their software needs while managing costs and compliance.

Author

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  • Fredrik Filipsson

    Fredrik Filipsson is an Oracle licensing expert with over 20 years of experience in Oracle license management. He spent 10 years working for Oracle corporation and then 10 years at a consultant leading engagements on Oracle license assessments, audits, ULAs. He is a public speaker and author

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