The Oracle Support Recalculation issue

Sometimes you find out certain things too late when it comes to license agreements: I tend to call those things your ‘black holes’. Because you didn’t see them when you signed the contract, and because…well… they suck. This one applies to you aswell, if you like it or not.

A random company buy’s some random Oracle licenses:
-10 CPU licenses for product ABC
-Each license has a list price of 10.000US$
-Annual support fee is based on 22% of the NET license fee

With this order volume, your default discount will be 15%. No questions asked. NET license fee will be 85.000US$. 22% of the NET license fee results in an annual support fee of 18.700 US$. However, you (like most clients) negotiate a n additional discount and probably do this just before quarter-end (Q4 if possible).

Scenario: Your discount is 45% from the Oracle pricelist
-Your NET license fee is 55.000 US$
-22% of the NET license fee results in an annual support fee of 12.100 US$

After some time, you need less Oracle Processor licenses
Maybe you consolidate your environments, or you just start using more efficient hardware: But it turns out that you don’t need those 10 Processor licenses anymore but only 8 (20% less). This is what will happen:

1. You will think your annual support fee will decrease by 20% to US$ 9.680
2. Oracle will tell you that your technical support agreement contains a section called “Pricing following Reduction of Licenses of Support Level” as well as a section called “Matching Service Levels”. Based on those sections, Oracle will tell you that:

You may not only de-support the 2 licenses, but that you will have to terminate the license right for them aswell.
Based upon the new remaining volume of licenses of the agreement, the regular remaining volume is only 80.000US$ worth of licenses. And, based on that volume, you – lucky you – will still get 15% of discount on the support value based on the remaining volume of licenses.
As such, your new support value for the 8 remaining licenses is (22% x 80.000US$) -/- 15% = 14.960US$ (remember, this used to be 12.100US$).

Oracle will not be that mean: In practice, your new support amount will not exceed the original amount. But fact is, that after you’ve cancelled the support for 2 licenses and terminated the actual license grant, you still pay the same amount of money as you did before. Once you’ve signed, you’re sucked in. Oracle is not alone in this practice. So prior to signing any large agreement, make sure you talk to persons who sign/negotiate such contracts on a regular basis.