Near the end of the summer, Oracle announced that it was making a "strategic decision to eliminate on-premise term licenses," effective September 1, 2020. Oracle states this decision was influenced by the organization's new focus on the cloud and an increasing number of on-premise clients moving toward perpetual licenses. This means that with a few exceptions, Oracle will no longer be offering on-premise term licenses. Perpetual licenses are not affected by this announcement, and existing customers paying support on their term licenses will remain supported through the end of their terms.
So, let's take a bit of a dive into what this really means for Oracle clients.
Key Takeaways
- Oracle announced it was eliminating on-premise term licenses, effective September 1, 2020, citing its cloud focus and the trend of on-premise clients moving toward perpetual licenses.
- Perpetual licenses are unaffected, and existing customers paying support on term licenses remain supported through the end of their existing terms.
- Most Oracle clients weren't significantly affected, since the majority already use perpetual licenses and shorter terms were typically only used for short-term projects or migrations.
- Despite the announced effective date, two-year perpetual licenses could still be purchased from Oracle after September 1, 2020, suggesting these agreements are being phased out rather than cut off immediately.
- Eliminating two-year terms removes a negotiating tactic customers previously used during audits, forcing them to buy multiple one-year terms at a lost discount or a full perpetual license instead.
Fact #1: This Won't Impact Too Many Oracle Clients
Oracle products are essentially business-critical; it's rare for an organization to decide they're only going to run one for five years or less. The majority of customers are already using perpetual licenses anyway. Typically, shorter terms are only used for short-term projects or migrations expected to take a year or less. In other words: unless you were part of a small minority of Oracle users, this news probably wasn't earth-shattering for you.
Also, if your organization is in the middle of an already negotiated term, you're fine – just be sure to finish your project on time (or expect to negotiate with your Oracle rep for an upsell).
Fact #2: The Dates Make No Sense
As if Oracle agreements weren't confusing enough, right? Oracle stated that this policy would be effective September 1 in its announcement and all related materials – only that's not right. You can still buy a two-year perpetual license from Oracle for just about any product.
That said, it's safe to assume these kinds of agreements are being phased out in the near future. Now is a good time to look at different options and decide which will best fit your organization's needs.
Fact #3: This Move Reduces Buyer Power
Previously, when an organization was audited by Oracle, it had a wider berth to negotiate. Let's say the organization had accidentally turned on a product in 2018 and 2019; until now, the customer could purchase a two-year term as a negotiating tactic to resolve that blip on Oracle's radar. As this decision effectively eliminates two-year terms, clients are required to buy either multiple one-year terms and lose the discount or purchase a perpetual license. So, this decision removes a fairly common negotiating tactic for audits.
Fact #4: This Is Another Reason to Have Your Act Together
As if there weren't enough reasons to watch your back and endeavor to be as prepared and organized as possible, this rule change should go to show you that Oracle can and will come for any client that can't keep their collective noses clean.
Plan migration projects ahead of time – years ahead of time, if possible. Know in advance how you plan to proceed with Oracle agreements. Keep impeccable logs – remember, if you're audited by Oracle, it's your responsibility to prove you have the necessary licenses from Oracle and that you're using the software in accordance with your contractual rights. Don't let projects slip. Oracle has it out for clients that are unable to do these things, and they make no bones about it.
Chances are, your organization is in a good place to handle this change in policy from Oracle, but if you have any questions about it, it makes sense to reach out to a compliance expert.
