Introduction
Interviewer: Thank you both for taking the time today. Could you briefly introduce yourselves and explain what Redress Compliance does?
Fredrik: Certainly. I’m Fredrik Filipsson, a director and co-founder at Redress Compliance. I’ve worked with Oracle licensing for about two decades, both inside Oracle and as a consultant. At Redress Compliance, we help companies understand and manage their Oracle licenses, negotiate contracts, and defend against audits.
Morten: I’m Morten Andersen, a director at Redress Compliance. My background is in Oracle license management and compliance. Redress Compliance is an independent advisory firm that guides businesses to stay compliant with Oracle’s rules while minimizing costs. We’ve seen all the tricks and complexities of Oracle licensing and use that experience to support our clients.
Oracle Licensing and Cost Management
Interviewer: Oracle licensing is notoriously complex. Why does it have to be so confusing?
Fredrik: Oracle’s licensing is complex by design. They have intricate rules for processors, core factors, and countless product options. Most customers don’t fully understand it, which often leads to mistakes and extra costs. The complexity creates confusion that Oracle’s sales teams can exploit.
Morten: Exactly. Oracle’s licenses cover everything from databases to cloud services, each with different metrics. They’ve also changed policies over time. All this complexity means if you’re not an expert, it’s easy to fall out of compliance or overpay. Honestly, it doesn’t have to be so confusing – but Oracle benefits when customers are unsure.
Interviewer: What kind of mistakes do companies make with Oracle licensing?
Fredrik: A common mistake is assuming something is “free” or included when it isn’t. For example, enabling an Oracle Database option or feature without realizing it requires a separate license. We see clients unknowingly using options like Partitioning or Advanced Security and then getting a huge bill in an audit.
Morten: Another mistake is not reading the contracts closely. Oracle’s terms can be full of ambiguity. If a contract just says “Oracle Database,” some assume it means any edition, and then they deploy Enterprise Edition when they only paid for Standard. In audits, Oracle will point out these mistakes and demand back fees. Virtualization is another – people run Oracle on VMware and don’t realize Oracle will insist you license every physical server in the cluster, not just the server where Oracle runs. That can blow up your license requirements massively.
Interviewer: Do Oracle’s licensing rules apply to development or standby environments as well?
Fredrik: Yes. Every environment running Oracle counts. Many assume non-production systems don’t need licenses, but that’s wrong. If Oracle software is installed and running – dev, test, QA, backup – it generally requires the same licensing as production.
Morten: The only exceptions are extremely limited. For example, Oracle has policies for disaster recovery: a passive standby might not need a full license if it’s truly idle except in an emergency. But in general, if it’s installed, you need a license. We see companies get caught out thinking a lab or backup server doesn’t count – Oracle will beg to differ during an audit.
Interviewer: Oracle software is expensive. Are the prices really justified?
Fredrik: Let’s be blunt – Oracle charges a premium because they can. Their database and other products are market leaders in performance and features, but you’re also paying for the brand and the support. The list prices are sky-high. Many customers feel the value they get doesn’t always match the cost, especially when they’re forced into buying more licenses due to complex policies.
Morten: Oracle’s business model relies on big spenders. They often bundle deals or give discounts if you commit more. But at the end of the day, yes – it’s very expensive. If you’re not careful, you can easily overspend by millions. We often see companies using only a fraction of what they pay for, essentially wasting money.
Interviewer: What drives Oracle licensing costs up the most for customers?
Fredrik: Several factors. One is hardware – if you deploy on a powerful server with many CPU cores, Oracle’s per-core licensing means your cost shoots up. Another is Oracle’s core factor calculation which can slightly reduce cost on some processors, but not by much. Another big driver is enabling extra features. If you use an option like Oracle Diagnostics Pack without a license, you’re on the hook for that license fee.
Morten: Also, support fees. After the initial license purchase, you pay support every year, typically 22% of the license cost. And that’s 22% of the net price you paid, which keeps increasing if you buy more licenses. Over a few years, the support costs can equal or exceed what you originally paid for the software. It’s a perpetual expense that grows. Additionally, if you ever want to drop some licenses, Oracle’s policies will “reprice” your support on the remaining licenses so you end up paying the same or even more – basically, they make it very hard to reduce your spend once you’ve bought licenses.
Interviewer: Can customers negotiate better deals or discounts with Oracle?
Fredrik: You can, but Oracle makes you fight for it. Initial discounts are common – hardly anyone pays full list price – but those discounts come with strings attached. To get a big discount, you usually need to commit to a big purchase or multi-year agreements. Oracle sales reps have quotas, and end-of-quarter or end-of-year is when they might be more flexible to close a deal.
Morten: We advise clients to leverage timing and competition. If Oracle thinks you might take your business elsewhere or delay the deal, they may offer a better price. But frankly, Oracle isn’t known for generosity. They hold a lot of power because switching off Oracle is difficult for many customers. You can negotiate, but you need a strategy and often a willingness to walk away or reduce scope. Always get any discount promises in writing.
Interviewer: What are the best ways to reduce Oracle licensing costs?
Fredrik: First, optimize your usage. Only run Oracle on the hardware you need – reduce the number of cores or processors where possible. We often help clients consolidate databases to use fewer servers or to use Standard Edition instead of Enterprise where it makes sense. That directly cuts license needs.
Morten: Second, identify any shelfware – licenses you own but don’t actually use. If you’re paying support on those, you might consider dropping them at the right time to stop the bleeding. Third, consider if you really need Oracle support on all environments; maybe you keep production on Oracle support but use third-party support for non-critical systems or older versions. And of course, third-party support in general can slash costs – many companies save 50% by moving maintenance to a third-party provider.
Interviewer: Let’s discuss third-party support. Is it viable to use a third party instead of Oracle for support?
Fredrik: It’s a real option and can save a lot of money. Companies find that third-party support vendors often charge roughly half of Oracle’s annual support fees. We’ve seen a client go from paying Oracle $1 million a year in support to paying a third-party $500,000 for the same coverage. That’s a huge saving.
Morten: The third-party firms also tend to support older product versions without pushing you to upgrade. Oracle will say “you must upgrade to stay supported,” whereas a third-party will support your stable older version for years. It gives you more flexibility. The main thing you lose is access to Oracle’s updates and patches – the third-party will provide their own fixes for critical issues, but some companies worry about not getting official Oracle patches. In practice, many find this trade-off worth the savings.
Interviewer: Is Oracle’s support really worth the 22% yearly fee, or are customers better off without it?
Fredrik: For some, Oracle’s support is not worth that price. Twenty-two percent of your license cost every year, indefinitely – that’s steep. If your systems are stable and you don’t need Oracle’s regular updates, paying that can feel like a tax. Oracle’s support basically gives you access to helpdesk, new releases, and patches. But their customer service often gets mixed reviews; some say it’s slow and not very helpful unless you’re a big name.
Morten: Plenty of companies stick with Oracle support because they feel it’s safer – you have the vendor backing you if something goes wrong. It also might be required for certain contracts or to stay compliant with some agreements. But I’d say many organizations overpay for support they barely use. It’s not crazy to consider dropping Oracle support for systems that aren’t changing. You have to weigh the risk of not getting official patches versus the cost savings. In many cases, alternative support or just self-support is enough, and the 22% could be better spent elsewhere.
Interviewer: What risks come with switching to third-party support providers?
Fredrik: The biggest risk is if you need Oracle’s direct assistance for a critical issue or if you plan to upgrade to a new Oracle version – you won’t have that access on third-party support. Also, Oracle will terminate your right to upgrade to newer versions once you leave their support, since you only have rights to the versions you had when you left.
Morten: Another risk is around compliance. Oracle might pay more attention to you if you leave their support. We suspect that companies that drop Oracle support could be more likely to face a license audit. Oracle knows you’re trying to save money at their expense, so they may scrutinize your license usage to see if there’s anything they can find. You have to be very sure you’re in full compliance with your licenses when you switch to a third-party.
Interviewer: Do you think Oracle actually targets companies that go to third-party support?
Fredrik: It’s our experience that Oracle doesn’t take kindly to losing support revenue. While they won’t say outright “we’re auditing you because you left,” it’s awfully suspicious how many customers get an audit notice not long after moving off Oracle support. Oracle’s license management teams know when support contracts end. They might use an audit as an excuse to get revenue another way or to pressure the customer back into Oracle support by finding compliance issues.
Morten: We always tell clients: if you drop Oracle support, be prepared. Have a recent internal audit done. Know exactly where you stand with licenses. That way if Oracle comes knocking, you won’t be caught off guard. It’s like leaving insurance – Oracle may look for other ways to get money from you.
Interviewer: Oracle sometimes suggests third-party support is not permitted under their contracts. Is it actually legal for a customer to use a third-party support service?
Fredrik: Yes – customers have the right to choose who supports their software. There’s nothing in Oracle’s contracts that forbids using an outside support provider. Oracle doesn’t like it, but it’s perfectly legal. Courts have upheld that third-party support companies can operate as long as they don’t misuse Oracle’s intellectual property. So the customer isn’t doing anything wrong by switching support.
Morten: Oracle spreads fear, uncertainty, and doubt about third-party support. They’ll imply it’s risky or not allowed, but that’s more sales tactic than truth. As Fredrik said, it’s legal. The main thing is that the third-party provider must operate within the law (for example, not illegally copying Oracle’s software). But as a customer, you’re fully entitled to get support from someone other than Oracle.
Interviewer: If a company leaves Oracle’s support for a few years and later wants to return, can they reinstate Oracle support easily?
Fredrik: Oracle will let you back on support, but it will cost you dearly. Their policy is that if you lapse support, to reinstate it you must pay all the fees for the period you were off, plus a hefty penalty – typically 150% of the last annual support fee as a fine. Essentially, you end up paying more than if you had never left.
Morten: Exactly. Oracle makes sure that coming back is painful. In practice, most companies that leave Oracle support never return because it’s just too expensive to justify. If you really needed Oracle’s support again, you might be better off buying new licenses (which include a year of support) or negotiating something fresh. But Oracle’s official stance is, “you can come back, but you must pay all the back support plus a penalty.”
Interviewer: Oracle has a “repricing” policy on support contracts. What does that mean for customers trying to reduce costs?
Fredrik: Repricing is basically Oracle’s way of saying “if you drop some licenses from support, we’ll charge more for the ones you keep so you don’t actually save anything.” For example, if you had 100 licenses on support and you drop 20 of them, Oracle will recalculate the support fee for the remaining 80 as if you had bought just those 80 licenses new. That wipes out any discount you had for buying 100 originally. The result? You end up paying roughly the same total support fee for 80 as you did for 100.
Morten: It’s a nasty surprise for customers. You think you’ll save money by cutting unused licenses, but Oracle’s contract terms prevent your bill from going down proportionally. Essentially, Oracle locks in your spend. There are some strategies to work around it, like terminating entire order sets or moving licenses around entities, but it’s complex. Oracle’s policy ensures they keep their revenue stream steady. So reducing licenses doesn’t easily reduce costs unless you exit support entirely for those licenses.
Interviewer: How often does Oracle audit its customers’ licensing compliance?
Fredrik: Oracle can audit you typically once every year or two at most per the contract, but in practice we see formal audits maybe every 3-5 years for a given customer. However, lately Oracle has been doing more “soft audits,” where a sales rep might reach out in a friendly way asking about your usage – that’s often a precursor to a real audit. Java is a good example, where they’re contacting many customers even without a formal audit letter.
Morten: It also depends on your profile. If you’re a big spender, ironically Oracle might audit less often because they don’t want to upset the relationship – or they may do it to find more selling opportunities. If you’re a smaller customer not spending much, Oracle might audit to try to generate revenue from compliance issues. There’s definitely an element of audits being used as a sales tool. We always say: assume you will be audited sooner or later and stay prepared.
Interviewer: What’s an Oracle license audit like? How do they conduct it?
Fredrik: When Oracle audits you, they send an official audit notice, often from their License Management Services (LMS) or GLAS team. They’ll ask to run scripts on your systems or to provide data outputs. These scripts inventory your usage – how many installations, which features are used, etc. Oracle then compares that to what you’ve purchased.
Morten: The process can drag on for months. They’ll come back with an audit report showing any gaps – like “you’re using 10 more processor licenses than you own” or “you activated options without licenses.” Then they’ll present a bill, basically, for the shortfall. It can be pretty shocking. Oracle’s auditors are thorough and not exactly forgiving. They operate under the assumption that any variance means you need to buy more licenses or pay back support fees for the unlicensed use.
Interviewer: Does Oracle take a hard line in audits? What tactics do they use to get compliance?
Fredrik: Yes, Oracle is known for aggressive audits. They will calculate huge penalties based on list prices. We’ve seen cases where Oracle’s audit findings are astronomically high as a starting point – it’s a scare tactic. They might say “You owe $10 million in licenses and back support,” expecting the customer to negotiate and settle on a big purchase or ULA.
Morten: Another tactic is leveraging fear and urgency. Oracle might threaten that if you don’t resolve the compliance issue quickly, they’ll revoke licenses or escalate legally. They sometimes involve their legal department to send letters, which can be intimidating. The truth is, Oracle wants a deal, not a courtroom, in most cases. But they will absolutely use the threat of legal action or massive fees to push customers into signing something – often a new license purchase or an unlimited agreement to resolve it.
Interviewer: How should companies prepare for an Oracle audit to avoid those nasty surprises?
Fredrik: The key is to be proactive. Perform your own internal audits regularly. Know what you have deployed and compare that to your entitlements. If you find you’re using more than you bought, fix it before Oracle finds out – either by uninstalling or by purchasing what you need on your terms, not in the heat of an audit.
Morten: Documentation is also crucial. Keep records of where and how you’ve installed Oracle software. If you have virtualization, document the configurations to show compliance if you’re using an approved partitioning method. And when that audit notice does arrive, don’t go it alone. Engage experts – whether internal or external – who know Oracle’s tactics. You want to control the flow of information. Only provide exactly what the contract requires. Oracle will ask for a lot, but you shouldn’t hand them more rope to hang you with.
Interviewer: Can a company push back on an Oracle audit or refuse to cooperate?
Fredrik: In general, you cannot outright refuse – your contract gives Oracle the right to audit. If you ignore them, they can escalate and even terminate your license agreement, which is a nuclear option. That said, you can manage the audit. You can negotiate the scope, the timeline, and ensure they respect your confidentiality and security processes.
Morten: Pushing back in an audit means setting boundaries. For example, if Oracle requests to run their scripts across everything, you can ensure it’s done in a controlled environment. Or you might push back on the findings if you believe Oracle is interpreting the contract wrongly – which happens often. Ultimately, you have to comply, but you don’t have to be a doormat. You can challenge their findings and negotiate the outcome. If you’ve prepared well, you’ll be in a much stronger position to do so.
Interviewer: Is there any way to avoid being chosen for an Oracle audit in the first place?
Fredrik: There’s no guaranteed way to avoid an audit. Oracle’s selection is a bit of a black box. However, companies that continuously spend a lot on Oracle – buying new licenses or cloud services – may be less likely to get a surprise audit, because Oracle already gets money from them. Conversely, if you haven’t bought anything for a while and Oracle’s sales team has no deals with you, an audit might be a way for them to create a sales opportunity.
Morten: We also suspect that certain triggers increase audit risk: things like moving to third-party support as we discussed, or a merger or acquisition. If Oracle sees a change in your company structure, they might audit to ensure all licenses are accounted for properly after the change. At the end of the day, you should operate under the assumption that you will be audited. The best “avoidance” strategy is simply to be ready so that an audit finds nothing major.
