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How Oracle tackles licensing discrepancies

The recent publication of court filings from a licence dispute case shows a catalogue of 'damaging' techniques the supplier used following an audit

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A 2016 Paris court ruling has recently come to light, revealing the extent to which software supplier Oracle will go in licensing disputes with its customers and approved Oracle implementation partners.

The Paris Court of Appeal ruling from March 2016 illustrates the tactics the supplier used against a customer and one of its major partners.

This case comes just a year after court filings revealed that confectionery company Mars disclosed hundreds of thousands of documents during a software audit conducted by Oracle.  

The Paris Court of Appeal ordered the software supplier to pay French vocational training organisation AFPA (the National Association for Adult Vocational Training) and systems integrator Sopra Steria Group €100,000 each in compensation for the prejudice caused to them during a licence dispute over an eBusiness Suite contract from 2002.

The court filing highlights the tactics Oracle uses when auditing licences for revenue generation. It also raises serious questions over whether selecting a major Oracle-approved systems integrator can offer customers any protection or guarantees that the software implemented will comply with the supplier’s audits.

One of the most significant revelations is Oracle’s role as a consultant on the project, in which it explicitly offered training material and integration to a module it later claimed was under-licensed.

The dispute concerned Oracle’s claim that AFPA was not authorised to use the purchasing (PO) module in its enterprise resource planning (ERP) suite, even though Oracle France had worked on the contract and supplied the software via Sopra.

The court papers stated that the training plan Oracle France drew up for AFPA explicitly mentioned the purchasing module. Invoices from 2006 also showed that Oracle France carried out advisory services for AFPA that did not make any observations on the use of the purchasing module.

Oracle’s claims

Oracle claimed AFPA had infringed its licensing and was not authorised to run the purchasing module for 885 named users. Oracle also claimed that Sopra Steria Group had committed a fault towards Oracle France and contributed to the acts of under-licensed software usage committed by AFPA.

The fact that Oracle France was acting in a consulting role at AFPA raises questions over its suitability as a trusted business adviser.

Commenting on the ruling, Robin Fry, legal director at Cerno Professional Services, said: “The AFPA case is a rare public examination of Oracle’s audit process, its escalation to legal, and finally its handling of claims against its customers.”

Fry said the case illustrates that Oracle cares very little about its relationship with its customers. “In pursuing such claims over a five-year period – and losing so disastrously – indicates a company seemingly very far removed from both good commercial judgement and fair regard to its customers,” he said.

Original ERP tender

The court filing showed that on 6 September 2001, AFPA issued a call for tenders for a financial management contract called the Mosaic Finance project.

On 13 November 2001, Sopra Group made a successful bid to integrate Oracle eBusiness Suite, and the ERP software was subsequently delivered to Sopra. The package included Oracle Applications/eBusiness Suite 11i and technical support services including upgraded subscription and product support.

Oracle audited AFPA in December 2005 and again in 2009. The second audit was suspended by Oracle while AFPA underwent a new software tender process. The court papers show that Oracle’s bid explicitly mentions “integrating perfectly with the module purchasing (PO) that you already use”.

Contract loss leads to audit

Oracle reactivated the second audit after it was notified that its bid had been unsuccessful.

In 2010, it gave notice to AFPA that 885 licences for the PO module were required. A demand was then issued for €3,209,895 for licence fees and €9,487,731 for support services plus taxes – a figure of more than €17,000 attributable to each individual user.

Although AFPA had historically been acquiring the required licences at an 86% discount, Oracle brought the claim for the damages owed to it at full list price, said Fry.

Five points to consider when dealing with Oracle

1. Oracle cares very little about its relationship with its customers.

2. Oracle’s assertions of under-licensing being a counterfeiting issue are wrong – if any monies are due, then this is simply a contract issue.

3. Oracle’s inflated claims at list price will not be tolerated when, as here, AFPA had previously placed orders at an 86% discount.

4. The court will not readily accept that there has been under-licensing of modules where Oracle insists on making available only downloads of the full software suites.

5. Oracle’s oppressive conduct will inevitably be recognised by the courts.

Source: Robin Fry, solicitor and legal director, Cerno Professional Services

Following Oracle’s appeal against the original judgement, the Paris Court of Appeal ruled against the supplier and stated: “Oracle companies acted in bad faith and disloyal to the respondent companies [AFPA and Sopra].”

Fry said: “Many users of Oracle technology and applications may have heard, or know first-hand, of Oracle’s uncomfortable policies regarding revenue generation. Here, then, is at least some external scrutiny of these policies and, just maybe, also an educational message to Oracle as to why, in the end, it loses these cases.”

But although the case shows the extent to which Oracle will go in its audits, there are no shortcuts to software licence compliance. Rory Canavan, author of the Global SAM Process Maturity Report 2016, said: “There are no guarantees. I have heard where Oracle consultants have gone into a customer’s site and installed software on trial, then LMS [the Oracle audit arm] has hammered the customer.”

Canavan said IT departments must ensure that compliance is part of the implementation and that licence compliance is maintained going forward. “You need to keep the software compliant. It is key to demonstrate licence compliance,” he said.

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Thanks for the great article, Cliff. This is the first I have heard about the 2016 case in France. As an independent Oracle license consultant (House of Brick) we see this kind of predatory activity from Oracle all of the time, and across every geography. Everything you mentioned, from the revenue generating intent of audits, to "punishing" customers who do not reward them with contracts, to eliminating discounts, and other aggressive tactics, are commonplace practice with Oracle. 

The most egregious tactic that did not get a mention is when Oracle claims that usage of virtualization (like VMware) constitutes an installed state, even when their software is nowhere near being installed and/or running on those virtualized hosts. Mars is certainly a great example of how a customer should push back on these non-contractual assertions.
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Couldn't agree more on the comment about VMWare - it's why we are supposedly using thousands of licenses when it's actually nothing like that. It keeps us tied in to a ULA (Unlimited License Agreement) which we don't need and is ultimately driving us away from Oracle as a whole.
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