Oracle PAH License Model – Hosting License – 2022

Oracle PAH is short for Oracle Proprietary Application hosting license. Oracle PAH has replaced generic hosting licenses that Oracle used to resell in the early 2000-2010. This is a license model available only to Oracle ISVs. Oracle PAH license model can utilize all Oracle technology software, including Oracle database and Oracle middleware products such as WebLogic. Oracle PAH license model is designed for ISVs or companies that build and develop their own IP running on Oracle technology, so they can create hosting environments (SaaS).

Oracle PAH License vs Full use

Full use licenses

Oracle end customers are purchasing full use licenses and they allow the end customer to use the Oracle software licenses for internal business operations and there are normally no restrictions for which applications you can use the Oracle licenses for.

From the Oracle OMA – rights granted:

Upon Oracle’s acceptance of your order, you have the limited right to use the programs and receive any services you ordered solely for your internal business operations and subject to the terms of this agreement,(…)

Oracle PAH licensing limitations

• The Oracle ISV owns the license, the end customers signs no licensing agreements.
• Oracle PAH license model can only be used if you own the IP that utilizes Oracle software.
• This means you cannot use an Oracle PAH license for third party applications.
• Oracle PAH license must be used for environments one to multiple end customers. This is not a license model that you should use for 1:1 hosting.
• The Oracle PAH license model is restricted to a specific solution/application, that is defined in the Oracle licensing agreement between Oracle and the Oracle ISV. It is called an Oracle APRF that is part of the licensing agreement that the Oracle ISV signs with Oracle.
• The solution that is based on Oracle PAH licenses must be commercially available to multiple end customers. If you are an end customer who is being approached by Oracle to re-buy new PAH licenses to replace old internal use licenses, be careful before purchasing licenses that may make you non-compliant.

Incorrectly purchasing Oracle PAH license model

• Oracle sales teams has aggressively been contacting customers and offering them to re-purchase their Oracle licenses under this Oracle PAH license model. However, this model is often the wrong license model, and you are exposing your company to financial risk.

What does it say in Oracle license agreements about hosting?

We see 2 different variations
• One contract has “Internet hosting” term added to the Oracle Ordering Document. You may have purchased full use licenses and Oracle granted you extended usage rights to both use the licenses for internal business operations as well as external entities.
• Oracle Proprietary Hosting – This is when you became an Oracle ISV and agreed sign Oracle partner agreements and completed the APRF form.

If you still have questions or want advice, please contact us in the convenient way from the contacts page

What does it say in Oracle license agreements about hosting?

00:00 Introduction to the hosting license and why Fredrik wrote about hosting licenses
00:20 Most of the information available online is incorrect.
00:40 Oracle account reps are often incorrectly selling these licenses to customers and partners.
00:53 Oracle policy “cancel and replace” if Oracle sales does this they may loose their jobs.
01:15 Oracle sales reps tried to use hosting licenses and perform a cancel and replace.
02:40 Oracle sales have often not told the customers the truth about PAH licenses
03:32 Question 1 – Can any company sign a PAH license agreement? (both customers and partners, however you must become an Oracle partner when you sign the PAH licensing agreement)
03:50 Basic licensing requirements for PAH licenses.
04:32 Question 2: Is the pricing the same for PAH licenses as normal/internal use?
04:50 Question 3: Your Oracle Rep wants you to purchase PAH licenses and lower your support fees over a few years, what should I do?
05:10 Question 4 – Do I need to license my test and development environments if I am developing an application (no prod)
05:40 Question 5 If my application is in production (hosting) do I need to license my test and dev?
06:00 Question 6. How do Oracle define what I can use my PAH licenses for?
07:02 Question 7: What is your advise on completing the APRF?
07:55 Question 8: What if I already purchased PAH licenses and you realize that you purchased the wrong licenses?
08:48 Question 9: License models for PAH, how do they work?
09:16 Question 10: Can I convert my internal use licenses to PAH?

Transcript:

So this is the article and it’s published on LinkedIn and it’s called, “Oracle hosting licenses. 10 questions that your Oracle rep won’t answer.” I’ve been thinking for a long time about writing about hosting licenses, because there’s almost no information out there and the little information I’ve seen is usually incorrect.

So why do I say incorrect? Well, when I worked at Oracle for nine years, one of those years was when I was working in the division that manages and sells these proprietary application hosting licenses. When I was at Oracle, I could see that the account reps were incorrectly positioning proprietary application hosting licenses to it customers.

Why are the account reps positioning proprietary application hosting licenses? Because Oracle have a policy called cancel and replace, and that is forbidden. That means that an Oracle account rep is not allowed to sell new licenses to customers just to replace older licenses. If that’s, discovered the account rep may be fired, but someone would have had old full use licenses that are for internal use only. Then you’re actually buying these proprietary application hosting licenses, that was a way to get around the cancel and replace because of how Oracle built their internal systems.

What have happened is that when you have an Oracle account rep saying that they have a new license that you can purchase, usually what they did was that if you’re paying $1 million in support to Oracle for your older licenses, Oracle would go to you and say, “If you buy these new licenses, it’s going to be at a lower cost over three year time period,” because they’re discounting the new licenses so heavily that instead of just paying maintenance for your old licenses, which would be a $1 million, $1 million, $1 million, $3 million over three years, you would instead buy these licenses for perhaps a $1 million, and then simply just pay $1 million as a license fee, plus $222,000 in annual support for three years, so at $1.6 million. Oracle usually designs the business case, so it’s not that of a big saving, but anyway, you’re going to make the savings and that’s a cancel and replace.

Oracle have, especially I would say in Europe, gone to customers and said, “Buy these prop hosting licenses.” What they’ve done is that they have not really told the customers the truth about what can they use these licenses for. It has happened that an end customer who are being told by Oracle account rep, “Please buy this new license and it’s going to lower your cost.” They might have discovered something about what are the rules around this, but then the account rep would simply come up with an excuse interpretation to calm the customer nerves. But what’s happening is that the customer is signing the contract and the sales rep is getting commission. Then a few years later, the customer that have signed this proprietary application license agreement incorrectly is at financial risk if Oracle is auditing them.

First question is, can any company sign a contract PAH licenses? Yes, any company can do that. You don’t need to be an existing Oracle partner. You can be an end customer that are developing your own IP to resell to multiple end users. Here you can see the basic conditions to fulfill if you qualify for PAH licenses, you must own that IP and application that you’re going to use the licenses for. You cannot use these PAH licenses for a third-party application. It must be your own application that you are developing a prototype testing and designing in-house. So it cannot be used for any third-party applications.

Second, if the application that is used for Oracle technology is not your own, you may not use PAH hosting model. You must make the licenses available to multiple end customers. It’s not only for your internal business operations. It must also be for external customers that have signed a purchasing agreement with your company.

Second question is the pricing the same for normal licenses? You may pay a slightly higher price for prop hosting licenses than normal internal use, but this needs to be negotiated with Oracle.

Third, your Oracle accounting want you to buy prop hosting licenses and replace your older licenses and lower my support fees over a few years. What should I do? Well, my advice is don’t rely on what the account team is telling you. Review the licensing terms, review the licensing options because the accounting will collect their sales commission, but it’s your company that would face a legal and financial risk if you’re audited.

Fourth question, do I need to license my test and development environments if I’m developing an application that will in the future go into production? No, if you’re an OPN member, you have the right to prototype and test your applications built on Oracle technology. So, that’s one of the benefits of being an Oracle partner and developing your own in-house applications is that you do not need to license, test and develop them.

If our application is in production, do I need to license my test and dev environments? Yes, the rule is, as soon as you go into production mode, you need to license all your test and development environments. That’s the moment, as soon as you go production, all your test and development needs to be licensed.

Question number six, how do Oracle define what I can use my licenses for? This is defined in an APRF. APRF is short for application package registration form. This is a template that you as an ISV, a partner to Oracle, will be required to complete. It will describe name of your application, its architecture, who are your end customers, what is your application name? This APRF that you then submit to Oracle needs to be approved by Oracle, they have a special team internally that will approve this. So it’s not approved by your account rep or your counterpart. This is someone higher up at Oracle, and that APRF, when it’s approved, it will be part of your licensing agreement going forward. That APRF is then limiting what you can use these licenses for. You’re not then allowed to take these licenses and use it for another application. They are locked to that specific application.

Next question. What is your advice on how to complete the APRF be as vague as possible. If you put too many details in this APRF, such as the application version, or too many details about technology that it’s using and how it’s connecting, we may need to negotiate a new APRF agreement with Oracle if you perform any changes or develop your applications further. It’s in your interest to keep it as vague as possible. I know that might sound wrong when it comes to software licensing, but in this case, vagueness is a good thing because then Oracle will have a much harder time to pinpoint if you are breaking your hosting agreement by further developing your application.

Question number eight, what if I’ve already purchased prop hosting licenses and I have the incorrect agreement licenses? Well, ultimately it’s your responsibility, no matter what Oracle have told you in emails or calls, what you can use the licenses for. It’s your responsibility to understand what is the licensing model and what are the terms that you agree upon when signing this contract. I would say that you have a financial risk if you have prop hosting licenses and are using it for internal use if you do not have your applications available commercially. If you’re not trying to resell these applications or have them available for others to purchase or having access to your servers, I would say that you are incorrectly licensed.

Number nine. How does the license model work for prop hosting licenses? The answer is it’s the same licenses. It’s the same standard license matrix. Named user plus, processor-based, account, and the account on enterprise. The difference is in the contract and who are using software and how you’re using it and that is defined by the license model, and as well as the APRF that you filled in.

Question number 10, can I convert to my internal use normal licenses to prop hosting? Yes, you can, but you do need to negotiate with Oracle. It’s not something that you can go and just do standard or default, this a simply a negotiation with Oracle, but if you’re willing to pay the money for it, I would say you have a very high chance of succeeding with this.

This is it about hosting licenses. I hope it was helpful. If you need further help, don’t hesitate in reaching out to me. Thank you.

What is proprietary hosting?

Oracle prop hosting license model is a one-to-many license model. The ideal scenario is when company A wants to create a Software as a Service offering with their own ip and use Oracle technology, such as a database. Instead of every company purchasing their own licenses, the hosting and the owner of the solution software buys the licenses.

Oracle PAH licenses vs Oracle full use licenses ?

Oracle PAH – can only be used for one solution/service.

Oracle PAH – Is a license model to allow third parties accessing Oracle software.

Oracle Full use – Is for your internal business operations, 1:1 license model.

There are full use Oracle ULA and there are full use for PAH license models as well.

Can any company sign a contract for Oracle hosting license ?

• Yes, but you must pay attention to what the requirements/licensing rules that apply for this model. Due to Oracle Account reps wanting to “resell” the Proprietary application hosting licenses to you they often miss-represent what you can use the Oracle PAH licenses for.

Basic conditions to fulfil if you qualify for Oracle PAH licenses:

• You must own the IP/application that you are going to use the licenses for. You cannot use Oracle application proprietary hosting licenses for a third-party application.
• It must be commercially available (for sale to other end customers, price list or sales material qualifies as commercially available)
• You must make the licenses available to multiple end customers (It’s not only for your own internal operations, but it must also be for external customers that have signed a purchasing agreement with your company).Oracle hosting licensing document, you can find here.

Oracle PAH License Model FAQ

Is the pricing the same for Oracle hosting license the same as for Oracle full use licenses?

You may pay a slightly higher price for Oracle proprietary application hosting licenses then the normal internal use, but this needs to be negotiated with Oracle.

Oracle Account team wants me to buy Oracle hosting license and replace my old licenses and lower my support fees over a few years. What should I do?

Do not trust on what the Oracle account team is telling you, review the licensing terms for PAH licenses. The account team will collect their sales commission and leave Oracle, but it is your company that will face the legal and financial risk if you are audited. Ultimately it is you who signs the contract and makes the decision that your company can use Oracle PAH license model.

Do I need to license my test and development environments if I am developing an application that will in the future go into PROD?

No, if you are OPN member, you have the right to prototype and test your applications. However when you have the solution in prod, test and dev needs to be licensed.

If our prop hosting application is in production, do I need to license my test and dev environments?

Answer: Yes as soon as your application is in production you need to license all your test and dev environments.

How do Oracle define what I can use my Oracle hosting license for ?

This is defined in an APRF (Application Package Registration Form) this is a template that you as an ISV/Partner to Oracle will be required to complete. It describes the name of your application, its architecture, where your end customers, your application name etc.

This is APRF needs to be approved by Oracle and will then be part of your PAH licenses agreemens.

What is your advice on how to complete the Oracle APRF?

Be as vague as possible if you put too many details such as application version. You may need to negotiate a new APRF agreement with Oracle if you perform any changes/develop your application further. It is in your interest to keep it vague to provide flexibility for future updates. We used to design and negotiate ISV contracts for Oracle, and this is our best advice. If you are an Oracle ISV and wants our expertise we are ready to help.

What if I already purchased Oracle hosting license and I have the incorrect Oracle licensing model ?

Ultimately, it is your responsibility to understand and agree to what you have signed. If you have signed Oracle PAH agreement and are using it for your own internal use, not multiple end customers. You have a financial risk if Oracle will audit you.

How does the licensing metrics work with Oracle hosting license ?

It’s the same as Oracle standard licensing metrics, named user plus and processor based.

The difference is in the contract and who, and how you may use the licenses. That is defined by the license model as well as the APRF form.

Can I sign a prop hosting ULA?

Yes, you can but Oracle usually puts on much more restrictions prop hosting Oracle ULAs vs normal ones – and you need to undergo the difficult exit process.

If you need further assistance, Redress can help you with

Understand what cloud products you need to purchase, if you are an existing Oracle EBS customer, we can help you map your current on-premises usage with the right cloud services.
Redress can help you design the cloud agreement making sure that you minimize any waste as you implement Oracle HCM.

If you are an Oracle ISV or an end customer and are discussing with Oracle about hosting licenses, Oracle PAH, Oracle PAH or oracle proprietary hosting licenses we can help. When we worked at Oracle we designed hosting agreements for Oracle partners and we can clarify all the Oracle licensing rules associated with hosting licenses as well as help you design a hosting agreement with minimal compliance risk. If you want to find out more about our services, schedule an consultation.

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