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Oracle's Pricing Models Raise Questions

META Group and Gartner Research advise customers to be wary of Oracle's new licensing scheme.

In an attempt to boost licensing revenue, Oracle is informing customers that, under the provisions of existing licenses, they must buy large numbers of extra licenses or convert to a more expensive processor-based licensing scheme.

Both META Group and Gartner Research have issued reports stating that Oracle is out of line in requesting the extra fees, and companies should be wary of any additional costs.

At the heart of the matter is a concept called multiplexing: funneling a pool of connections through a Web server or transaction processing monitor, thereby masking the number of users accessing the Oracle database. Customers using this technique license Oracle software based either on CPU or on the number of users accessing the Oracle database.

Oracle doesn't have a problem with multiplexing. In fact, it's trying to expand the definition of multiplexing to include batch feeds from non-Oracle applications into Oracle databases. For example, a customer that licensed an Oracle sales data warehouse in 1997 with 80 users (populated via a batch process with data extracted weekly from a 5,000-user mainframe CICS/DB2 order entry app) must now treat all 5,000 as users of the data warehouse, or switch to a CPU-based license. Either way, Oracle makes more money.

META and Gartner say Oracle's request violates the original contracts agreed upon when the sales were made. "We have reviewed hundreds of Oracle contracts in the last two-plus years. None of them has contained provisions of that sort," says META Group analyst Mark Shainman.

Gartner says clients have told it that some Oracle sales staff are:

• Limiting customers' purchasing options by making them choose the option that costs the most, whether processor-based or named-user pricing. In reality, if an enterprise can identify users, it can use either processor-based or named-user pricing, regardless of Internet or intranet use.
• Getting enterprises to pay for extra named users for data sourced from an Oracle application database into a data warehouse. According to the reports, some Oracle personnel claim that even though the data warehouse may not be Oracle-based, it still has to be licensed.
• Trying to get customers to pay extra named-user or processor fees for a data warehouse that has data coming in from either Internet data feeds or internal data sources.
• Performing -- or stating that they will perform -- bottom-up audits and occasionally coming back with increases in licensing costs.

• Get two proposals from Oracle based on each of the licensing methods and choose the one that makes the most business and economic sense.
• Perform your own audits on a regular basis and validate any assertions made by Oracle.
• Seek immediate legal and purchasing advice about the legality of any extra charges levied by Oracle.
• If possible, renegotiate contracts with Oracle if these licensing issues arise and, in any new contract, ensure the licensing method is agreed to explicitly.