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Virtualizing Oracle software: Don't pay for what you don't need

May 7, 2014 06:30 AM ET

Enterprises want to consolidate Oracle in virtual environments to reap the benefits of consolidation. On traditional server hardware, where utilization rates hover around 15%, IT typically over-sizes and over-licenses servers for peak loads. But with virtualization and related technologies such as Live Migration and vMotion, average daily server efficiency has climbed into the 50% to 60% range.

"You can license many fewer physical servers on native hardware," Welch says. A typical consolidation can reduce the number of physical servers that need to be licensed from say, nine servers to four, or even three. "That should be a massive savings," he says. But not only do some customers end up paying for new Oracle licenses on processors that aren't running Oracle in a vSphere cluster, they also end up paying up to a 22% annual maintenance fee even on licenses that have been retired.

Paying maintenance on dead licenses

Even if customers avoid paying for additional processor licenses after transitioning to a virtual environment, they may not be able to reduce ongoing software maintenance costs for licenses that are no longer in use after a server consolidation has taken place. That leaves many organizations paying anywhere from 15% to 22% of the original software license fee every year for products that just sit on the shelf.

So even if virtualization efforts reduce the number of licenses needed in a large organization by 30%, it can still add up to millions of dollars in potential annual support savings that go unrealized. "Oracle has set up virtualization in a way where users do not benefit from the consolidation," says Constellation Research's Wang. Some of his clients, he says, have moved to Microsoft SQL Server on VMware to save on licensing costs.

Oracle organizes licenses into license sets, says Welch. For example, all Oracle Database licensing tiers -- Standard One, Standard Edition and Enterprise Edition -- form a single license set. According to Oracle's matching service levels policy, you cant cancel maintenance and support on a subset of licenses within a license set without also cancelling those licenses. "Should the licensee desire later to use those licenses, they would have to purchase them from scratch, not just renew maintenance and support on them," Welch says.

Whats more, says Guarente, "If you terminate, then there's a re-pricing," and that doesn't always work in the customer's favor. For example, Oracle may remove previous discounts and raise prices, with the result that "the new price might be exactly what you paid [before]," he says.

Bill, the Fortune 500 company CIO, says no one should be surprised that they can't selectively cancel maintenance on individual processor licenses without canceling the entire contract and renegotiating. Package deals have offered substantial volume discounts, and when you go that route, "it's all or nothing," he says.

But contact prices have gone up, Bill acknowledges. His maintenance amounts have risen to 22% of the original license purchase price -- his contracts originally started at 15% -- and his discounts are much smaller than what was offered in the past, he says, though he declined to say by how much. So he's shifted away from big software contract packages in favor of making smaller buys and keeping those contracts separate.

Stretching dollar

"The more segregated your paper is, the better," Welch agrees. But many organizations have taken Oracle up on an offer to do a "migration" of their existing paper to pull everything together into one neat, tidy contract. "It's rarely in the customer's interest to do so," he claims.

Tom, the other CIO, has been down that road before. "It ended up being a zero-sum game," he says. "You're not going to get tremendous value out of it."

Fear factor

Many organizations don't want to make waves against the vendor of software on which their core business runs, especially one that has a reputation for being litigious. But Welch doesn't think customers should worry about pushing back, at least when it comes to vSphere clusters. "There's no case law anywhere where Oracle has gone after a customer for subcluster licensing," he says.

Guarente offers more measured advice. "I haven't heard of anybody being sued, but people are very afraid. Talk to your attorney," he says. Ultimately, he says, "My experience is that most customers buckle." His advice: "Don't go wobbly." There's simply too much money at stake.

For his part, Tom is cautious about pushing back too hard. "The next time you do any negotiation with them they're going to remember you pushed back on this, and it will come back to hurt you." Here's his strategy: "Try to figure out where you can extract concessions. Know when they're under pressure and when they're not. It's like a chess game. Individual moves don't win the game. It's your overall strategy that counts."

Customers want to be in compliance, and often the contract makes it clear when the customer should pay -- and for what. When it's unclear, however, there's room for negotiation, Guarente says. "None of this is in the contract. It's all in the policy documents out there. So you need to be an expert with Oracle and know when to push -- and when not to push."

This article, Virtualizing Oracle software: Don't pay for what you don't need, was originally published at Computerworld.com.

is a national correspondent for Computerworld. Follow him on Twitter at Twitter twitter.com/rmitch, or email him at rmitchell@computerworld.com.

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