Successful contract license management is a key factor in remaining in compliance.

Here are the key steps in the process:

·         Forecasting – looking at what is needed and getting the necessary approval. In this step you must also be sure that your licensing meets your architecture.

·         Negotiation – Go in and negotiate with your vendor, this can be done at anytime and the process will vary depending on what you need.

·         Repository – Update, update, update! Be sure to continuously update your repository to be sure that you are in compliance. The repository will give you the foundation for determining whether you are in compliance and give you the centralized database that everybody in the company who has their hand in it will know what is going on. A thorough repository will also keep you prepared should you face an audit.

One of the big benefits of having a repository, an inventory of your licensing, is to better leverage the flexibility of your license types. 

Procurement is a tough job from any perspective. You have multiple requests at once for some kind of technology investment, which must be run through various channels, negotiated (if at all) and then implemented. We find in many cases that the job is made more difficult by a lack of policies in place. Policies are, in many cases, either not in place, not well implemented, or not being communicated.  Managing procurement with vendors like Microsoft and Oracle, in some cases, will require its own dedicated person within the organization. This function requires somebody with a lot of specialty to keep up with the frequent changes within Oracle.

One easy improvement that can be made within a procurement process is to have a system in place for analyzing software and hardware contracts as they arrive. Standardized processes are also extremely helpful. In the case of companies that are the product of consolidations or mergers, each company will have different processes which are badly in need of consolidation.  It is important to have a real compliance management process with definite policies and enforcement in place. To help with your internal compliance, you need to have some means of doing an internal audit on a relatively frequent basis. If you can’t manage this process internally, outsource it.

With software and hardware vendors, timing is everything in terms of negotiation. With a strict set of policies and procedures in place, your procurement department will be better prepared to respond in a timely fashion and take advantage of quarter and year-end concessions and discounts. Planning and forecasting your needs is also a vital part of this process, but a lack of policy is the most common issue with procurement, a flaw that can end up costing organizations a lot of money.

Get it in writing. Get all assumptions clarified and then confirmed in writing. You don’t want to assume anything and any discussion or email in which you are getting the best leverage should be mentioned in detail within your agreement. We see a lot of our clients – even the largest Oracle enterprise – treat emails and verbal discussions as legally binding agreements, which is untrue in the case of an Oracle software licensing agreement. It is not up to the sales person to remember what he/she promised you or what concessions were discussed and agreed upon. It is up to you to remember and make it legally binding.

Confirm assumptions with examples. For example, your SLA may state that you have worldwide usage rights. You assume that you can use your Oracle product anytime, anywhere. However, that would very likely be an incorrect assumption. You should inquire whether the worldwide usage rights are affected by:

We often drill down to these small, but extremely important, details during the discussions we have with Oracle on behalf of our clients. When you clarify all the assumptions, the last step is to ensure that there is language within your SLA that defines usage more clearly.

Never assume a License Usage Right.  If you think that your Oracle license allows you specific actions or specific functions, you need to check your SLA. For example, if you have eBusiness Suite and you assumed that the collection module was included in the accounts receivable functionality (which is reasonable). The collections module is actually a separate module and a separate cost.

Never assume that the vendor doesn’t know. We have many companies come to us for the first time and they tell us about a yet-to-be disclosed data warehouse launch, a merger or company acquisition, layoffs, or other major corporate changes. Often, the company believes that Oracle doesn’t know about it and they want to know what their SLA options are.  However, don’t be too sure of that. With larger companies, it’s not too hard to find information about the organization including the inner workings and operations.

We get a lot of questions about Oracle’s processor core factors. Core factors can change and this is particularly difficult when you’re the person in charge of tracking changes in licensing or the procurement process. Case and point, the Sun UltraSPARC T2+ core processor licensing changed from 0.75 to 0.50. As soon as the change is in effect, your organization is considered out of compliance.

See Oracle Processor Core Factor Table, which charts vendor and core processor licensing factors. Changes can be found as a footnote at the bottom of the page.

Naturally, there are cost benefits to buying fewer licenses when re-negotiating a contract. The question is – how do you weigh the cost benefits against the risk of having too few or even being out of compliance because you are using your licenses improperly? Having an accurate account of business need is essential in reducing risk associating with contract negotiation and estimated licensing usage. The benefits of having a clear understanding of your licensing needs outweigh the cost of defining the usage. Not only will a vendor be more willing to negotiate, but they will also be less likely to audit you, knowing that you are on top of the situation ahead of time.

Having an automated discovery tool will benefit a business of any size. The ability to run the discovery tool at your leisure will help you remain compliant and, should you be threatened with an audit, provide up to date information to halt the process in its tracks. There is no downside to keeping track of your software assets and licensing usage. It’s a small price to pay for a big payout – not only will it reduce your licensing and maintenance fees, but it will also put you in a better position for negotiations and audits. However, there are many nuances to software terms and conditions that would not necessarily make it into the automated system or someone has to remember to (re)place a change of rules in the automated SAM. A prime example is the increase to the IBM Power 6 change in Oracle’s count for multi-core licensing. IBM Power 6 multi-core is equal to 1.0 per processor, while older versions are counted as .75 per processor. Someone needs to remember to make a note of a change like that within the SAM rules AND they need to remember to distinguish between the fairly new IBM Power6 and older versions (as the licensing rule is different). Otherwise, the information the SAM solution provides will not be inaccurate and increases risk during a vendor audit.

Software asset management (SAM) doesn’t have to be a daunting process. It can be very simple and rewarding if implemented properly. Here are six necessary steps to a successful SAM program (tongue twister eh?):

1.     Know and understand your SLAs for all your software vendors (not all licensing agreements are created  equal), the terms and conditions, and if you have questions, ask your rep or a consultant to explain them to you. Now this seems basic and it should be, but I would be remiss not to mention it here as the first step.

2.     Take an inventory of all of your IT assets – software and hardware. With Oracle entering the hardware business, companies need to be aware that this may be of significance to future ITAM. Keep track of what is currently in use, who has access to it and where it is being used. Is it being access remotely? How many employees are using it at the same time? While this sounds simple enough, take step 2 and tie it back into step 1.

3.    Compare and Contrast your inventory to the most up-to-date software purchasing records to determine whether or not you have assets that are out of compliance. This should also be checked against employee usage – perhaps more than one employee is using the same licensing which does not comply with your SLA on that program.

4.     Fix the problems  once you know what the problem is, uninstall software that is not compliant,  buy additional licenses and re-negotiate your contract(s). You must plan for the needs of the business over the next 12-18 months to determine whether or not additional licenses will be needed in the near term.

5.     Further planning is needed now that you have a clean slate and have fixed compliance issues. Now is the time to implement a plan for the future, which may include developing a repository for assets, purchasing SAM software with an automated discovery tool, or bringing in outside help. It is always a good idea to assign a group of internal managers to oversee the process and of course, get buy-in from the management team (which can be done by showcasing cost savings associated with a proper SAM program). You will also need to develop and market a new set of policies and procedures across your organization that will keep employees from misusing licenses.

6.    Keep it up! After a plan is in place; policies and procedures have been created and communicated; and licensing is up to date, the last step is maintaining the SAM program. Remember to:

Looks like Ellison is going shopping again at bargain prices with Oracle‘s acquisition of Sun Microsystems. This could mean that Oracle is more in line with becoming a competitor to HP, even while touting a joint HP-Oracle Database Machine and Exadata Programmable Storage Server (only launched last year).

With Sun, Oracle will get more from the business relationships to sell into customers it already knows and expand into organizations where it may not have a current footprint. But how will that affect Sun customers? We think the pending acquisition will affect them in a big, big way. Through any M&A activities, it can be a big bonus for existing clients to renew contracts with value added services and bigger concessions. But there will be layoffs. Bernstein analyst Toni Sacconaghi estimates a loss of 5,500 to 10,000 jobs.

And, oy! What about the licensing? As seen with Hyperion, it was only a matter of time before its licensing practice and pricing was aligned with Oracle’s methodology.  Right now, Sun is extremely lenient (to the point of being lax) when it comes to audits.  The company seldom enforces compliance and Sun clients know it. As long as clients keep buying, Sun doesn’t audit.

Oracle, on the other hand, is very serious about its intellectual property and once Sun is part of Oracle, I would expect that there will be vendor audits for Sun customers.  Sun customers should be prepared!

We suggest current Sun customers do an internal audit, get help, and get things in order. Oracle takes compliance seriously. I’ve written a lot about Oracle and compliance issues — here are some previous posts that might be helpful in understanding Oracle’s mindset.

1-      Prepare for an Oracle Audit

2-      Compliance: The Foundation of Working with Oracle

3-     One-minute Oracle Licensing Tip: Modifications

We know how much time you DON’T have so we decided to create this weekly digest to help folks stay on top of software licensing, compliance, and audit news specifically to Oracle and Microsoft. We also added other interesting tidbits on both companies here along with general licensing news that could ROCK your world.

Since last week, there has been a big hullabaloo about flat-rate or pay-as-you-go licensing for vendor software.

CNET News Should software face the flat-rate music future?

San Jose Mercury News Oracle Wins Patent Ruling

GigaOm 5 Trends That Will Separate the Strong From the Weak in 2009

Oracle Journal Viewpoint: Oracle Should in 2009 Support All Major x86 Virtualization Platforms

CNET News Oracle and backups in the Cloud

SC Magazine Making a case to the board

Seattle Post Intelligencer Claim: Microsoft earned $1.5B from “Vista Capable” PCs

CRN Five Reasons Microsoft Wants A Pay As You Go Model

ComputerWorld Ballmer Blasted for Linux Stance

New compliance and accounting regulations are forcing organizations to rethink how they view software. The emphasis on governance is changing the way companies think about software as an asset and how they account for it with their auditors. Unlicensed or mis-licensed software is a liability. There are 6 simple, basic steps for understanding and managing your software assets: