ITAMS’ Oracle licensing team provide an overview on Pool of Funds agreements.
For several years, Oracle has had an active policy to increase the number of Unlimited Licence Agreements (ULAs) signed with customers globally. This type of agreement is not something new, as some of the companies Oracle acquired previously have also used it.
For example, BEA Systems, (before its acquisition), used to offer their customers the possibility to buy licences using AYCE (All You Can Eat) agreements, these were replaced by Oracle ULAs, and PPBD (Prepaid Burn Down) agreements which are now, more or less, Oracle Pool of Funds (PoF).
Oracle decided to diminish the risk of letting customers choose the licences they wanted to use from the software listed in their ULA agreements, re-introducing the so called PoF agreements.
During the past year, the number of PoFs have increased and now, more and more ULA agreements take the shape of a PoF agreement.
So what exactly are Pool of Funds?
The Oracle PoF is a special type of licence agreement. In return for paying an upfront licence fee, end users get the right to deploy a mix of a pre-defined software against a fixed price, for a limited amount of time, until they reach the invested amount. If we refer to the initial agreements (ULAs) from which PoFs are derived, the conclusion is that Oracle dropped the option to select unlimited quantities (which is applicable only for ULAs) for the PoF agreements. This means that they can now, better handle any customers that are using large amounts of software, eliminating the risk of them using more software than what was initially paid for.
Customers must be re-assured that almost all the terms of a PoF deal are negotiable. The larger the company, the higher the discounts they will receive. Nothing is fixed, so more products can be included in the deal and the usage area can be expanded from a certain country to worldwide coverage. There are a lot of factors to take into consideration for this type of deal and they depend on the specific needs of the end-users.
Besides the licence fee, a customer must also pay for annual technical support based on the full PoF credit during each year of the PoF period and beyond. In addition, the PoF ordering document will specify a “Total Support Stream,” which the customer must maintain throughout the PoF period in order to keep the right to burn down the PoF credit until it is exhausted or the PoF period expires. Any failure to maintain the Total Support Stream will result in an early termination of the PoF period, and the customer must immediately declare licences in accordance with the contract conditions.
The Total Support Stream will include:
- Existing licences for the software programs that are included in the PoF agreement.
- All support for new licences included in the PoF agreement.
- Licences for the software programs that are included in the PoF owned by companies that are acquired by the end-user during the PoF agreement period.
- New licences for the software programs as included in the agreement, and as acquired against a price hold, after the signature date of the PoF agreement.
Usually, customers that have an active Pool of Funds agreement are contractually requested to provide periodical usage reports which are called “Licence Declaration Reports” (the standard term is every 6 months but this may vary from customer to customer). In this way Oracle is using the information from the report and updating their repository with the quantities provided.
An important fact is that, at the end of the contractual period, any unused licence credit will NOT be reimbursed; however, if at any time throughout the contractual period a client’s deployment worth exceeds the initial net credit, a new payment is due.
Furthermore, having a Pool of Funds deal doesn’t mean that Oracle will not conduct an audit during the term of the agreement in order to validate that the declared software listed in the Licence Declaration Report is complete and accurate. That is why our recommendation to customers that own PoF agreements is, to keep track of all licence records internally and if possible, use relevant SAM tools and support services that will ease their efforts.
ITAMS’ Licensing Analyst Sergiu provides an insight into the Oracle Licence Inventory.
The Oracle audit process represents a series of steps. The basis for this is Oracle’s so called “Licence Inventory”, although other software vendors may refer to it as ‘licence repository’/ ‘entitlement’, etc.
The Oracle licence inventory report is an excel spreadsheet summarising the licence products purchased by a particular customer and also a comprehensive overall picture of the historical support and licences.
How is this report used?
The report is used by Oracle Licence Management Services (LMS) consultants as a primary verification tool against which the original contracts are checked, in order for them to build a clear, simple and complete software repository. Later on, this will act as a guide for Oracle field consultants when managing their clients’ software accounts.
Grouped in several tabs, the information is based on the contract migrations report data and product migration rules. As a customer, special attention should be paid to your reference information, such as the correct spelling of names and ensuring that the address you have registered is the correct one. Also, pay particular attention to the status of your licences (if they are active or inactive) and the licence metric name of each licenced product.
Can the customer obtain this information from Oracle?
In 90% of cases, the customer will receive a “customer facing document”, where details about Oracle’s licencing audit report can be found. Included is a licence table (a simplified format of the licence inventory), nonstandard clauses (found in the original contracts), definitions of the licence metrics that the customer is licensed on (taken either from the original contract or from Oracle’s price lists) and finally, the minimum number of users /devices required for every software product (so these can be correctly licenced).
As Oracle consultants build the customer repository using different systems, sometimes the information lacks accuracy, so the customer should pay extra attention to ensure that the details contained in the inventory are correct.
For the customer, the most sensitive information to check is related to:
- Product name
- Licence Level
- Licence Term
- Support status
- Licence ownership
- Duplicate products.
For a customer to have a clear licencing position, they should ensure they have:
- A tool that is capable of tracking all software licences currently in use.
- Identified all the deployed licences across the organisation’s network. (Oracle uses measurement scripts which may be provided (but not in all cases). Customers must ensure that they know what the outputs are and that an expert is working on that.)
- Built and maintained a report with detailed information on licence use. In other words, keep track of licence use internally.
- Started comparing entitlement and deployment on a regular basis in order to have a strong compliance position.
After all the above are taken in consideration, the customer should have a clear view of whether they are under-licensed and need to acquire extra licences or whether they are over-licenced and need to uninstall licences.
Managing software assets can feel like an endless maze if you don’t know how to approach licensing information. Remember creating an efficient SAM process takes a lot of time and needs dedicated resources.
Achieving data accuracy can initially be unnerving. Not knowing this can hide a plethora of issues that do not come to light until a vendor, such as IBM, demands an audit. When this happens there is no window for any remediation work, nor investigation on how best to proceed.
On the other hand having good quality data can be a ‘win’ situation and can help with:
- planning for warranty – reducing maintenance budgets
- managing leases – reducing cost at end of life
- software optimisation – reducing licensing costs
- utilising asset reuse and increased reliability to provide maximum use of life
If IT Asset information is not accurate it can have a dramatic effect on the bottom line. In the two cases which come to mind, both relied heavily on accurate information. One client had an exposure of approximately £3 million whilst another made a saving of about £20 million.
On another occasion, ITAMS was asked to conduct a due diligence audit for an outsourcing organisation. This involved an audit on all the hardware which was going to be managed under the contract. Initially we were told there were 10,000 desktops to audit. Within the first two weeks of the project, it soon became apparent that this number would be much higher. On completion, we audited approximately 17,500 systems. The implications were large and the atmosphere difficult, as many decisions, such as licensing and hardware maintenance budgets, had been made based on the assumed figure.
With all such undertakings there are generally more assets than anticipated. The norm is 10% to 15% extra. However, this can swing the other way when an outsourcer manages an audit, and reporting can often be overstated by 30%. A classic finding is, maintenance being paid on 10-15% of hardware assets which no longer exist, and approximately 20% of software assets that are no longer in use.
In summary, inaccurate data will affect the bottom line both negatively and positively. The effect may not necessarily be immediate, but the longer it is left, there is a greater risk that an event will expose any problems which could potentially be both embarrassing and expensive.
Traditionally walk-around or physical audits have been the main stay for IT Asset managers but in today’s technology rich climate there is a plethora of electronic network audit tools that can offer faster data collection capabilities.
Electronic audit tools are however complimentary to walk-round audits, not a replacement. Physical audits are expensive and if used, should only be used to kick-start a project. Drivers for physical audits might be the level of accuracy required, coverage of secure or not LAN-connected assets (e.g. stores), and the additional information they offer, e.g. location, assignment, asset tag, nearest phone, etc.). Cross correlation of physical and discovery data is now highly useful… especially when integrated with an asset lifecycle tracking system.
The table below sets out a brief overview of the two common data collection methods:
Data Collection Method
|Electronic Network Audit Tools
Discovers and scans all hardware devices on the IT network for detailed hardware attributes and all the installed software and operating systems
|Walk around / physical audit
Physically/Visually identifies the hardware device
Both data collection methods provide practical options for managing your hardware estate however neither method, standalone, can provide 98+% data accuracy.
So what is the best method?
From experience there are several obstacles that may get in the way of correctly managing your hardware estate. Firstly at management level, key decision makers tend to argue, “We know what we have, I do not see any problem, or why fix it when it is working?”. Lower in the organisation the case is different, “We have always done it this way, but we know the data is less than 70% accurate”. Eventually, as installs, moves, adds and changes occur the inventory repository (if there is one) is not kept current (old assets not removed), and the accuracy level falls even further.
Therefore there is often a need for a one off physical audit to re-initiate / validate a lifecycle system’s core data, but no one wants to keep doing that. Discovery and a slick barcoding add-on to the lifecycle system acts as a way of constantly refreshing and validating the data and avoiding the costly re-audit, as well as giving the rich benefits of cross-correlated physical and discovery info (great for maintaining the constantly changing hardware CI layer of CMDB for example).
So my message to Asset Managers is, are you sure you want to keep managing data you know is bad, or would you prefer to kick-start a new and more efficient mechanism which generates real value based on trustworthy records?
I recently visited an organisation, where due to their business sector, they had a “laissez-faire” attitude to tracking their assets. However recent changes from the Financial Reporting Council (FRC), means that this has to change. Below are key areas which have to be considered before committing to change, as it will affect the whole organisation and may conflict with existing cultures.
- Understand why IT Asset Management is import to the business.
- Demonstrate the ways in which this information is or could be used.
- Get Board level ‘buy-in’ to the above – crucial!
- Produce a business plan which clearly shows why this is needed, what the cost would be and how the returns will be realised.
- Have a clear roadmap / strategy over time, not just a single project.
- Have an IT Asset Policy which is clearly communicated and understood.
- Have solid lifecycle touch / capture points.
- Produce sound and tested procedures which are simple to follow, and automate using barcoding.
- Know what accuracy is required and why, and who your data customers are.
- Where is the data going to be held, who is responsible for it and who should have access to the data?
- Know what sources of data are currently available – and are they trustworthy?
- What other sources are required for your business purposes?
- Have a feedback system to test the accuracy, including a service compliance function in larger organisations.
Key: Clarify and align responsibility across the whole organisation.
Tip: Start to plan for the future.
The key to providing an accurate effective licence position (ELP) is reliant on the accuracy of the IT inventory.
Many organisations cannot produce an accurate asset inventory report with an accuracy of 98%. Ensuring you have a 360° view of your hardware estate is an essential piece in the jigsaw. Knowing what hardware you have, where it is located and the status of this inventory is essential.
Technology audits can only provide between 85% to 95% accuracy. All too often, there is a reliance on a variety of technologies, spread sheets and Active Directory, with no coherent strategy to reach the desired level of accuracy necessary in today’s world of complex licensing models.
The 360° view of your hardware estate must also take into account licensing implications and the location and hardware profile of devices which are stored, retired, and passive, in production or disaster recovery systems. Once this information has been carefully collated, it can then be reflected correctly in SAM data, so that the correct effective demand is used in ELP calculations.