According to Oracle's official notice, the purpose of Oracle's license audit is to ensure that the customer is using Oracle software in accordance with the terms and conditions stipulated in the license agreement.
Oracle's– official letter to the customer about the commencement of the license audit process states that the purpose of the license audit is:
● Bring customer's license agreements and customer's technical support data into compliance with Oracle's data regarding customer.
● Access and ensure that customer's actual use of the Oracle software is in compliance with the license agreements.
● Make recommendations regarding customer's licensing structure to optimize current and possibly future use of Oracle’s software.
● If necessary, provide customer with additional information about Oracle license agreements, policies, and business practices.
However, one has to understand that Oracle is a commercial company, and its goal is to make money. Therefore, it is necessary to perceive the audit as a reason to find unlicensed use of software by the customer in order to pay for it later. Oracle is loyal to the customer and allows to buy additional licenses at a discount in case of discrepancies found during the audit.
Like any rightsholder, Oracle and IBM seek to protect their intellectual property rights.
When you buy a license (right) to use Oracle software, you must sign a License Agreement (you cannot use the software without it), which includes a section on auditing. It gives the copyright holder the right to check how you use their software.
In the case of Oracle, this section in one of the license agreement types (Oracle License & Service Agreement, OLSA) looks like this:
Upon 45 days written notice, Oracle may audit your use of the programs. You agree to cooperate with Oracle’s audit and provide reasonable assistance and access to information. You agree to pay within 30 days of written notification any fees applicable to your use of the programs in excess of your license rights. If you do not pay, Oracle can end your technical support, licenses and/or this agreement. You agree that Oracle shall not be responsible for any of your costs incurred in cooperating with the audit.
A preliminary audit is a set of activities aimed at taking an inventory of existing licenses and software use. Its goal is to compare the actual use with the number of licenses purchased. This is necessary to understand whether the use of the software exceeds the number of licenses purchased by the customer.
Since the terms of the License Agreement impose on the customer the obligation to monitor the correct use of the software, internal audit is not only legitimate, but also necessary to fulfill the customer's obligations under the License Agreement.
The involvement of CLA Group as a third-party organization with the necessary knowledge and experience to conduct internal licensing audits is absolutely legitimate, because the customer does not have their own expertise on the matter. At the same time, under the terms of the agreement, CLA Group guarantees that its expertise is fully similar to that of the vendor.
Waiver of Audit is a waiver of the customer's obligations under the License Agreement (or Sublicense Agreement) between the right holder or its representative and the customer. If either party fails to fulfill its obligations under the License Agreement, such agreement may be unilaterally terminated by the other party.
This means that the customer will lose all rights to use the software under the agreement. Thus, in case of a refusal to conduct an audit, the customer risks losing all his investment in Oracle software. Logically, we can assume (since there is no such practice in the world yet) that this would entail a loss of reputation and possible claims from the vendor.
The legal entity that entered into the License Agreement is always liable. Even if the customer has purchased licenses, but at the same time concluded an agreement to perform IT-services functions with a third-party company, and the customer does not know whether it complies with the software use rules, the customer will still be responsible for non-compliance with the License Agreement. And even if the customer has hired a third-party company to customize the software they use, they are still responsible for it.
If the customer has hired a third-party company that requires specific licenses for customization, then while working for the customer, they are responsible for the software that such third-party developer (customizer) uses. If unlicensed Oracle software is found on the developer's laptop, the customer will still be responsible.
However, you can always engage CLA Group for the purposes of monitoring and evaluation of software use and have prompt and reliable information to make timely decisions and prevent violations of license agreements with Oracle.
Undoubtedly, it's worth seeking audit support (CLA Group provides such a service) before the vendor makes a claim. Challenging the results of an audit already conducted by a vendor is much more difficult, and therefore more expensive, but still more profitable for the customer. After all, CLA Group's services are far less expensive than paying for Oracle's claims. Challenging Oracle's audit results reduces claims by an average of 50-70% of the original claim volume.
Why is it worth doing? Because for lawyers, the main thing is the interpretation of the agreement wording and the rules of software use. Each side interprets it in a way that is beneficial to it. Therefore, Oracle has made conclusions “in its favor.” It is necessary to check and try to “prioritize your own interests.” In our practice, we have been able to significantly reduce the volume of claims (by more than 80%).
The interpretation of software use depends on the wording of the agreement and its constituent documents, which are referenced therein. According to the definition of the “processor” metric from the agreement:
“Processor”: all processors on which Oracle programs are installed and/or running.
This means that if you have installed Oracle software on the processor, it must already be licensed, no matter how many times it has been used.
There is a great deal of wording in agreements and the documents included therein that can be interpreted in many different ways. CLA Group specializes in interpreting these terms and defining them in the interest of the customer.
According to Oracle's licensing rules, test and development environments must be licensed in the same way as production environments. In modern companies with their own IT ecosystems that provide services to external and internal customers, the volume of software use in test environments can seriously exceed the volume of use in the production.
Therefore, it makes sense to establish control over the use of software in test environments and increase the parameters of “overuse” (increase use by reducing the number of physical servers), because test environments are not as “business critical” as productive ones.
CLA Group operates within the applicable laws of the countries where the project is carried out, as well as within the rules established by the rights holder. However, there are no rules restricting the customer to remove unused products, including retrospectively. After all, if the product is not used/has not been used, the need to license it lies in the plane of compliance with the formal rules established by the license agreement.
CLA Group specialists have the necessary skills and knowledge to correctly delete and deactivate products in accordance with Oracle policies and help the customer to avoid possible claims in case of incorrect deletion or presence of “residuals” of usage data, which are often interpreted by Oracle in its own interests.
Our company was historically formed by people who worked for Oracle and IBM, who developed the software that the vendors use in their audits, people who did those audits for IBM and Oracle, as well as the people who developed the wording for the vendor agreements. Not surprisingly, with their vast experience working with customers, they know all the possible options in which vendors may have a claim against the customer and know how they can counter it. For years, CLA Group has been developing and multiplying its technical, legal and organizational expertise. For technical expertise, CLA Group has developed its own methods, entirely analogous to those of the vendors, allowing the audits to achieve entirely analogous results.
CLA Group legal experts know perfectly well how to oppose a vendor; they are familiar with all vendor agreements, sometimes better than the vendor’s lawyers themselves. To address organizational issues for all vendor processes, including audits, agreement certifications, etc., our experts lead license management projects according to international project management, IT resource and software asset management methodologies, such as PRINCE2, PMP, CSAM. We are so confident in our abilities that we provide financial guarantees of our results!