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Oracle Insight: What can trigger an Oracle license audit?

When a license compliance audit letter from Oracle drops in their mailbox, half of our clients seem to understand what triggered the event. For the other half it comes as a total surprise.

Find out how many of Oracle’s license audit ‘triggers’ might apply to your organization

When a license compliance audit letter from Oracle drops in their mailbox, half of our clients seem to understand what triggered the event. For the other half it comes as a total surprise. So what’s the story? Is an Oracle license audit a random event that you cannot foresee or are there reasons, or ‘triggers’, for being selected?

If you have been selected for an audit you might be interested in our upcoming webinar “How to manage an Oracle license audit”

In our view, almost all audits take place for one good reason and that is to generate license revenue. Whilst the Oracle LMS department is operated from Oracle’s finance division, the headcount is funded by Sales. It would be unwise for Oracle to invest this limited capacity and costly audit activity in clients where no revenue can be expected. So how do Oracle identify the most potentially lucrative clients to audit? Let’s take a look at the top 7 trigger points – in no particular order.

A previous Oracle LMS audit was more than 3 years ago

Whilst an Oracle customer may have been deemed compliant at the close of their last license audit, Oracle know that things will have changed since then: The focus and the lessons learned may have dwindled and the responsibility for license compliance may have been re-assigned to a new employee, perhaps with less actual understanding of Oracle licensing. Also, in the last 3 years the organization’s hardware has most likely been renewed and/or architectures have changed. All of which support a plausible assumption that the perfect compliance picture from 3 years ago is no longer perfect.

Cancellation or termination of Oracle support

Organizations moving their Oracle deployments to new or other solutions may consider cancelling Oracle annual support, either partially or in full. Some of them may consider whether to discontinue patching, and save on the technical support from Oracle by contracting a third-party support company such as Spinnaker Support, Rimini Street or similar. To Oracle, this is a clear audit trigger as their customer is no longer loyal; therefore, they will not hesitate to conduct an audit to extract a last big dollar revenue ticket while they can.

Merger, Divestiture or Acquisition

People handling Mergers and Acquisitions often split contracts based on variables other than forensic audits or sound arguments involving actual license compliance. It is very common to split a license agreement based on headcount or revenue, just to get a ‘ballpark figure’. Elements such as required IT transformations and future architectures are not being discussed – and Oracle know it. Often, Oracle will support the requested split or merger of licenses without asking too many questions. Thereafter, it’s an opportunity for Oracle to internally discuss the future of their client and decide if they should be nominated for an audit exercise in a few months time.

Running Oracle on VMware

It’s been 10 years since our Oracle licensing expert Daniel Hesselink de-bunked Oracle’s licensing ambiguity on VMware at VMworld. For Oracle Sales this is still a valid topic for a sales discussion – or for nominating clients for a compliance audit. Oracle Sales are always on a fishing expedition. Once they learn you operate Oracle on VMware, the chances are you will end up on a license audit nomination list. Depending on available auditing resources, you may expect a notification letter.

Growth of Revenue or Employees

More often than not, each of these situations will create a need for increased computing resources to operate the company. For Oracle Applications, many license definitions are based on the number of Employees or $M Revenue. Both are classic triggers that may earn you a place on Oracle’s nomination list for an LMS audit.

Oracle missed a revenue target

It is not uncommon for Oracle to audit a customer after losing a bid or commercial opportunity. Sales representatives must keep track of sales opportunities and how likley they are to convert. If an opportunity is converted at 50% of the forecast revenue, it is what it is. But if 0% of the opportunity is monetized, the findings of a compliance audit might offer an alternative way for Sales to still achieve their forecast revenue target.

Oracle ULA audits and certifications

The Oracle Unlimited License Agreement or ‘ULA’. It’s a bit like eating unlimited-spare-ribs in a restaurant – you cannot eat everything that is listed on the menu and drinks are not included either.

A ULA is exactly the same. No ULA’s exist where you can deploy every software product from Oracle in unlimited quantities. And yet, organizations often perceive the ULA warrants they are compliant. During the ULA period, Oracle may audit the use of their products, and Oracle will focus on all the many products besides ‘spare-ribs’! During certification, Oracle will do exactly the same. So, at the end of a ULA, you are 100% at risk of an audit, it will just be presented as ‘helping you with the certification process’.

Other factors

Though Oracle LMS will independently nominate clients, the vast majority of audits are nominated by Oracle Sales and validated by LMS. The validation is based on expected revenues and expected efforts to complete the audit. Obviously, auditing a client with 100 IT sites is more time consuming than auditing a global IT infrastructure that is operated from 3 global sites under centralized responsibilities.

What to do if one or more of these triggers apply to your organization

Depending on how many of Oracle’s audit triggers apply to your organization, you may need to undertake an Internal License Audit. This is a pro-active review of your technical estates, performed the same way Oracle would. Our independent Oracle licensing experts specialize in this activity and, on completion, will provide you with an Effective License Position (ELP) report. This invaluable snapshot will indicate the level of licensing risk that may exist in your organization and, if present, where this can be found.

We will show you how to use the report to visualize the consequences of a specific scenario or change in license assignment and infrastructure. This gives you the opportunity to sanitize any risks before Oracle get the chance to monetize them.

We would be happy to give you a demonstration using a sample report. Please contact us or reach out to Daniel directly (dhesselink@itassetalliance.com)

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