How Oracle selects customers for software audits

Navigating an Oracle license audit can be a daunting task. That’s why we’ve created this comprehensive guide to give you the answers you need to manage the audit process effectively.

This guide is crafted by Oracle licensing experts who have been on both sides of the table – conducting audits for Oracle and now, as consultants, helping over 100 companies defend themselves in Oracle license audits.

We delve into the Oracle license audit process, highlighting the most common reasons customers are non-compliant with Oracle. We then offer strategic recommendations on how to manage the audit effectively. Our first piece of advice? Don’t face an Oracle licensing audit alone.

Audits form a significant part of Oracle’s license revenue. We estimate that 70% of all Oracle software license revenue stems from license audits. Here’s how it works: The Oracle account team nominates a customer for a license audit each year. The selection is rarely random.

To understand the potential financial risk – you should read the  Oracle LMS compliance policy and also view Oracle price lists.

Oracle License Audit

A summary of this article

  • No organization is compliant with their Oracle licensing, small or large organizations. We have conducted Oracle licensing assessments for over 300 companies, so far one company has been compliant.

  • Oracle software is very expensive, 8 cores of intel processor equals approx $ 300,000 in license fees and maintenance. If you miscalculate or misunderstand a licensing policy, it very quickly gets expensive.

  • Oracle customers should as soon as they recieve the audit notification, contact an Oracle licensing expert who can analyze the same license compliance scripts as Oracle uses. They conduct an audit before Oracle is allowed to start its own audit.

  • 90%+ of all compliance issues are due to lack of knowledge of Oracle licensing rules and or policies, these can be remediated before the audit begins.

  • If you have an Oracle audit report and made the mistake to go alone, there are still many things an Oracle licensing expert can help with. Such as reviewing findings to identify errors in the report or find the most optimal way of licensing.

Oracle License Audit Process 

Understanding the Oracle Audit Cycle

Oracle typically audits customers every 3 to 4 years. However, this timeframe can vary. If you’re an Oracle customer who has previously been found out of compliance with your Oracle software license agreements, you’ll likely face an audit again.

Similarly, if you decline to purchase Oracle software licenses and cloud services, your chances of being audited by Oracle increase.

The Challenge of Oracle Audits

Managing Oracle audits can be complex due to the lack of software tools that accurately measure your licenses. It usually requires a combination of the following:

  • Software tools
  • Expert knowledge

To accurately measure Oracle licenses. According to our records at Redress, out of the 300 licensing assessments we’ve conducted over the years, only one organization has been fully compliant.

Proactive Management of Audits

Audits can be easier to manage if you’re proactive upon receiving the audit notification letter from Oracle. It’s crucial to:

  • Quickly engage with an Oracle license expert
  • Understand your licensing position before the audit begins

By doing so, there’s a strong chance you’ll pay zero to Oracle after the official license audit.

Mastering the Oracle Audit Process

Mastering the Oracle audit process is essential for companies to take control and avoid unnecessary fees to Oracle. Remember, you have 45 days to reply to the Oracle audit. This means you have 45 days to:

  • Review your Oracle licensing
  • Make sure your licensing is in order before the audit begins.
  • Come up with an Oracle audit defense plan

Taking these steps can help ensure a successful audit outcome.

oracle license audit process

The Oracle Audit Process Simplified

Here’s a breakdown of the Oracle audit process, simplified for better understanding:

1. Oracle Audit Notification

Oracle LMS will send a friendly notification letter to your CFO, CIO, or both. This letter notifies you of Oracle’s intention to perform an audit of your Oracle software licenses. The letter will also indicate whether the audit will be conducted by Oracle directly or by an Oracle reseller/partner on their behalf.

2. Audit Kick-off Meeting

During the kick-off meeting, Oracle aims to agree on a timeline for you to share all necessary data. This step is crucial as Oracle’s audit process depends entirely on your cooperation and data provision. Oracle audits rely on you running their Oracle LMS scripts or license compliance tools.

3. Data Sharing & Oracle LMS Scripts

Oracle provides you with access to a web-based license audit portal. You’ll be asked to answer a questionnaire about your Oracle usage here. It’s important to provide accurate information in this portal.

You can then download the Oracle LMS scripts that Oracle wants you to run and upload the output in the same portal. We advise not to share any data with Oracle that you haven’t independently analyzed.

4. Oracle Audit Report

You’ll receive a report approximately 4-6 weeks after you’ve shared the data with Oracle. This is usually a “preliminary report,” where Oracle asks you to review the findings and confirm whether you agree.

If you’re at this stage, do not agree with the findings until you’ve had an Oracle licensing expert provide a second review of the license audit findings.

The reports are almost always issued in the second month of Oracle’s financial quarter. You have 30 days to purchase licenses for any shortfalls identified in the reports. Hence, you can expect the report in the second month of the quarter.

What can trigger an Oracle Audit?

  1. Hardware Environment Refresh: If you’ve conducted a hardware environment refresh within the past 24 months, it could trigger an audit.

  2. Old or Outdated License Metrics: Using old or outdated license metrics can raise a red flag for Oracle.

  3. Mergers and Acquisitions: If your company has recently undergone a merger or acquisition, it could trigger an Oracle license audit.

  4. Failure to Renew Unlimited Licensing Agreements (ULAs): If you’ve failed to renew your ULAs, it could lead to an audit.

  5. Recent Changes in Software Spend: A sudden change in your software spend can alert Oracle and potentially trigger an audit.

  6. Declining to Purchase Oracle Software Licenses and Cloud Services: If you refuse to purchase Oracle software licenses and Oracle cloud services, you’re more likely to be audited by Oracle.

Understanding Oracle LMS / Oracle GLAS

Oracle LMS, which stands for Oracle License Management Services, is Oracle’s official audit organization. Reporting directly to the Oracle CFO, this organization operates independently from the Oracle sales team. In 2020, Oracle LMS was renamed Oracle Global License Advisory Services (GLAS).

The organization is structured into several groups, with the main workforce in Bucharest, Romania. This team is responsible for conducting all licensing analyses of Oracle LMS script outputs, including:

What Role does the auditor play in the audit

Oracle LMS has local members in most countries/regions worldwide. These individuals act as project managers and the face of the Oracle license audit. Their responsibilities include:

  • Hosting all Oracle license audit meetings
  • Creating the audit project plan
  • Presenting and writing the audit report

These local members work closely with the local sales teams to decide which Oracle customers are selected for Oracle license audits. However, most of the Oracle licensing audit work is done by Romania’s technical analysts.

Oracle LMS Audit Negotiations

It’s important to note that Oracle LMS does not negotiate commercial contracts with its end customers. The Oracle sales organization manages this task. The Oracle sales teams and LMS often play the “good cop, bad cop” game. However, don’t be fooled by this tactic – the Oracle sales teams pull all the strings at Oracle.

Understanding Oracle JPE

Oracle JPE, short for Joint Partner Engagement, is an Oracle initiative that uses Oracle resellers to conduct and manage Oracle license audits.

Oracle does not pay the JPE partners any consulting fees and is only rewarded if they can resell licenses to cover any shortfall in the Oracle license audit report.

Warning: This is a red flag for anyone familiar with Oracle licensing. Oracle licensing around many topics, such as Virtualization, Cloud, and DR, is vague and open to interpretation.

Having a company managing software audits with an incentive to resell more licenses is questionable – you can imagine that the Oracle licensing interpretations are unfavorable to the end customer.

What is Oracle SIA?

Oracle SIA, short for Oracle Software Investment Advisory, is an initiative started by Oracle to help more customers transition to Oracle cloud and educate and train its customers about Oracle licensing topics. Former ex-Oracle LMS auditors account for 80% of its staff.

However, the results of this initiative have been clear. Many Oracle customers who started conversations with Oracle SIA about their licensing were surprised when Oracle SIA discovered non-compliance during those educational sessions.

Oracle SIA has turned help into threats of official Oracle license audits unless a purchase for new licenses was made.

Recommendation: It’s advisable to seek independent advice on Oracle licensing, not from the vendor.

What is Oracle LMSCollection Tool?

Oracle LMSCollection Tool is Oracle in-house developed set of scripts for measuring its customers Oracle software environments.

Oracle customers are allowed to use this script for measuring Oracle licenses, however the difficulty comes into being able to correctly interpret the output towards a license requirement.

The Oracle LMS scripts cover Oracle Database products and all its options, Oracle middleware products and Oracle E-business Suite, Oracle Siebel licensing, Primavera licensing, Peoplesoft licensing and JD Edwards licensing.

Oracle license compliance script

Our recommendation – if you want independent advice on Oracle licensing or cloud, you should work with a third party that is not incentivized to push you into one direction.

If you are under an Oracle license audit and need Oracle audit support, contact us and we can start to help you as fast as possible.

How to manage the Oracle audit

Before the audit begins

Delay the Oracle license, you normally have 45 days to acknowledge you have received the audit letter. This is the time when you should quickly engage with an Oracle licensing expert to review your licensing.

This should be an ex-Oracle auditor who has helped hundreds of Oracle customers before and can use the same tools and methods that Oracle will use in the official audit.

oracle license audit triggers

Three Oracle license compliance risks

1. Oracle Database Compliance Risks

Oracle products have different editions, make sure that you have installed the correct version. Oracle database also have additional features that requires additional licenses. If you unknowingly have used those features now or in the past, you will be required to purchase licenses for both past and active usage.

2. License Metric Mistakes

Oracle have different rules for how to calculate Oracle licenses for processors (CPU) or Named User Plus. It is important to review the hardware you are running and understand Oracle licensing rules to make sure you have sufficient Oracle licenses to cover your needs.

There are for example user minimums for each product, 25 user minimums for Oracle database enterprise edition and the options must have matching quantities and metrics.

3. Virtualization and Cloud Policy Risks

If you deploy Oracle software on virtual technologies it is very easy to be out of compliance with your Oracle license entitlements. Oracle soft partitioning guide that includes vague rules for how to license Oracle in VMware, Hyper-V, IBM LPAR, and other technologies are often a cause for concern.

If you are deploying Oracle licenses in AWS or Azure, there are rules for how to calculate the licensing when deploying in public cloud.

Many Oracle customers are being caught out in  license audits because they are not aware of these licensing policies.

FAQ on Oracle license audits 

Oracle License Audit Defense Service

Our Oracle License Audit Defense service is delivered by former Oracle license auditors, and includes the following services:

  • Oracle Licensing Assessment: We assess your current Oracle licensing and provide a comprehensive report on your compliance status.

  • Oracle License Compliance Report: Our report includes a detailed analysis of your compliance risk and financial exposure, as well as recommendations for solving any compliance issues.

  • Contractual Compliance Review: We review your contracts and agreements to ensure that you are meeting all of your contractual obligations and maximizing your licensing benefits.

  • Advisory in Oracle License Audit: We provide guidance and support throughout the entire Oracle license audit process, from initial notification to final resolution.

  • Audit Negotiation Service: Our experienced negotiators work on your behalf to minimize any financial exposure and ensure a fair outcome for your organization.

Most of Redress Compliance clients end up paying zero to Oracle in audit penalties, contact us today to get help!

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