Are Consultants Needed to Clarify Software Licenses?

News Analysis: The Oracle-SAP case raises the question of whether users should hire a third party to understand license agreements.

In 2006, Miro Consulting was ranked No. 15 on Doloittes list of 500 fastest growing tech companies and No. 397 on Inc. Magazines 500 ranking of the fastest growing privately held companies in the United States. The company has had a three-year growth rate of 362 percent.

What makes Miro so successful? Its in a business few are scrambling to get into, but a service many companies find they need—whether they want it or not. Miro prides itself on understanding Oracles licensing rules and regulations cold, according to founder and CEO Scott Rosenberg.

"We follow [Oracle]. We live, breath and sleep it," he said. "When Oracle makes an acquisition—which is constant—we burn the midnight oil to learn that."

Miros job is to serve as the middleman in what can be tense negotiations, with customers seeking a better understanding of their contractual obligations and, at the end of the day, better pricing discounts, while Oracle, of Redwood Shores, Calif., might be seeking remuneration for what it sees as non-compliance.

It makes for a tough negotiation day for chief technology officers like David Hauser.

A veteran of large companies with big Oracle implementations, Hauser found himself out of his depth in recent negotiations with Oracle.

"We decided we really needed to find someone when we were going to a large scale upgrade with multiple nodes and RACs [Real Application Clusters]. The licensing questions were becoming very difficult," said Hauser, chief technology officer of GotVMail, a Weston, Mass., company that offers a virtual PBX system for small and midsize companies.

"One sales rep would say one thing [regarding licensing] and another would say, This is how you license it. There were hundreds of thousands of dollars in pricing difference between what different sales reps would say. So we developed a relationship with Miro and we came to the [negotiation] table with a basic understanding. Its not that we didnt want to do it [ourselves], we couldnt."

The practice of major software companies writing mystifying license agreements is not new, and certainly not one practiced by Oracle alone (though thats where Miro makes its money). But the practice of writing complex license agreements, coupled with suits like the one Oracle has recently pressed against rival SAP for allegedly overstepping its license boundaries, brings to bear an important question: Should companies have to hire a third-party consultant just to understand a software license agreement?

Beyond that, should the onus of determining license compliance fall on the customer, who in turn may have to shell out for a consultant like Miro to find out if theyre even in compliance?

"As much as I like Miro, I dont think it should be necessary to hire them," said Hauser. It would help "if [vendors] begin to realize that simplifying licensing would create more revenue than confusing people. But its been in practice for a long time [with the thought that] complex licensing gains more revenue. I dont think it does; but I dont run Oracle."

/zimages/1/28571.gifSAP has admitted wrongdoing in Oracle lawsuit. Click here to read more.

What Miro, in Fords, N.J., brought to the table for GotVMail is an expertise in Oracle licensing derived from being involved with about 250 previous negotiations. That experience gives Miro the advantage of having important knowledge it can pass on to its customers, like knowing when and where companies can get price breaks—coming in at the end of the fourth quarter or having government vendor status are the obvious examples—or whether a company is in compliance with previous license agreements.

"At the end of the day, its about software compliance," said Miros Rosenberg. "Oracle doesnt have any bells or whistles or stops that say, You are the 101st licensed user and your [company] is only licensed for 100 users. Its really about being licensed. You can download all you want, but youve got to tell Oracle what youre using. The client is responsible."

In March, Oracle filed suit against SAP, of Waldorff, Germany, alleging corporate theft on a grand scale. In more than 150 separate allegations against SAP, Oracle alleged that SAP, through its third-party support subsidiary TomorrowNow, went in to Oracles customer support Web site and downloaded more documentation than it was licensed to do on behalf of customers.

TomorrowNow provides third-party support for applications from companies—PeopleSoft, JD Edwards, Siebel Systems—that Oracle has bought over the past two-plus years, all at about 50 cents on the dollar.

While SAP officials admitted on July 3 that some TomorrowNow employees had not followed procedure and did download more documents than their customers were licensed for, the admission of guilt doesnt get to the heart of the matter. Oracles suit against SAP really brings up another question with license agreements: Should the obligation of determining contract compliance fall on the customer or the vendor? In addition, should Oracle have some basic technology in place that would not allow users to access beyond what they are licensed for?

The questions have yet to be answered, though they will likely come up should the case between Oracle and SAP reach trial—or the U.S. Department of Justice decides to file charges against SAP. A Justice spokesman said on July 3 that while the department is looking into the case, there are no formal charges filed.

GotVMails Hauser said the fact that Oracle doesnt have some sort of stop gap in its systems to enforce compliance makes it easier for him to be flexible in deploying his database assets. On the other hand, simplification of license agreements would be helpful.

"Oracle has made these very complex licensing rules that have made them a lot of money—they are able to acquire a lot of companies," Hauser said. "But in making these very complex license rules, it creates loop holes. Some people utilize them, some dont. It would do everyone a lot of good if Oracle simplified—[everyone] except Miro. It would do Oracle good and the marketplace good."

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