Oracle’s Pool of Funds (PoF) agreements allow customers to pre-purchase Oracle software licenses for a period of time and consume, or burn down, that credit as their usage increases. PoF agreements specify a selection of Oracle products, their respective prices, and a period of usage. During the usage period, a customer can use any of the specified products and decrement its PoF credit as new licenses are consumed. Furthermore, typically every 6 months, the customer is required to report consumption of credits to Oracle. Oracle assigns these as perpetual license entitlements to the customer. At the end of the usage period, any unused credit is forfeited.
As a brief example, consider a $1 million, 3-year PoF with the following products, along with the following PoF pricing:
|Oracle Database Enterprise Edition||Processor||$23,750|
- In this case, the customer would have paid an upfront fee of $1 million with a 3-year deployment term.
- The example prices shown reflect a 50% discount from Oracle’s full list price for each product. Database Enterprise Edition list price is $47,500 and WebLogic Suite is $45,000. Customers negotiate the discounted price up front during the contracting process.
- The customer would also have paid 22% support, $220k in this case, for the first year. The customer will pay $220k in support for each of the following 2 years as well.
- The customer may deploy the above two products as part of this PoF. Each time a processor license is consumed, the corresponding value must be decremented from the original $1 million pool. Suppose an 8-core server with Database Enterprise Edition is added. This will require 4 Processor licenses. Under this PoF example, 4 Processors of Database Enterprise Edition will cost 4 x $23,750 = $95,000. This will be decremented from the pool.
- Only the products on the PoF may be consumed and the customer is required to maintain support through out the PoF term.
- Every 6 months, the customer must certify to Oracle the licenses consumed from the PoF. This is done through a License Declaration Report (LDR). The declared license quantities will be assigned by Oracle as entitlement to the customer as perpetual entitlement.
- If the PoF pool is exhausted during the term, the customer may not deploy anymore license quantities under this agreement and must purchase them separately. Any unused PoF credit at the end of the PoF term, in this case 3 years, will be forfeited.
What can go wrong with Pool of Funds?
PoF agreements can be beneficial depending on the circumstances. Customers can typically negotiate good discounts and maintain some flexibility in how they eventually end up consuming their Oracle spend. However, as with any aspect of Oracle licensing, several things can go wrong:
- Customers may not have a good baseline of what products they anticipate using in the PoF term and end up with a sub-optimal product mix on the PoF. This can also impair the discount negotiation.
- The routine delivery of the LDR report to Oracle every 6 months is a time consuming process. Correctly counting usage of Oracle programs is not easy and requires expertise.
- The traditional Oracle licensing risks due to virtualization, incorrectly counting cores & users, cloud, etc. still remain.
- Incorrect counting can lead to over- or under-reporting to Oracle and incorrect license entitlement assigned by Oracle to the customer.
- Without tracking deployments and having a good strategy around Oracle license management, customers may discover PoF credits consumed in unintended or unexpected ways.
- Compliance issues can arise due to exhausting and exceeded PoF credits, as well as due to use of products that are related to products on the PoF but are not themselves on the PoF.
- Customers can end up at the PoF termination and not have utilized their all of their PoF credits, and thus forfeit PoF value.
The above are just some of the issues that can arise in the PoF process. These and other factors can prevent a company from getting the best value out of the PoF spend while exposing it to Oracle license compliance risks. If you need assistance with any aspect of your Oracle Pool of Funds agreement, from initial planning to reporting and optimization strategy, reach out to us.