Countdown of Oracle's Most Egregious Terms and Conditions - Number 1: Audit Clause

Clients are well advised to include specific language governing Oracle audits.  Most important is the ability to purchase any compliance licenses as a result of an audit action at the contractual price hold discounts                                     (#12 on our Oracle's Most Egregious list), and in the event that the price hold expires, at a mutually agreeable discount at the prevailing discounts available in the market for similar deals not to be unreasonably withheld. 

The current contract language in the standard Oracle agreement requires clients to purchase compliance licenses at list price.  In the case of a 75% price hold discount, this would mean you are acquiring the licenses at 25% of the cost you would have to under the standard language, which represents a 400% cost increase absent this protection. 

In addition, we suggest that strong language be included to prevent Oracle from being able to charge for compliance licenses unless it can be proven that those licenses were actually used.  In most cases, clients find themselves in the audit cross hairs not because they used and didn’t pay for licenses, but rather because unused software was automatically installed on their machines (#2 on this list) and they unknowingly ran afoul of Oracle’s compliance policies.

Whatever the results of the audit, have your supplier (and/or the auditor) explain any discrepancies, the likely root causes of such, and what best practices you may want to reference to prevent the same issues from happening again in the future.

Further, we suggest that at least a compliance action would have to rise to the standard of Gross Negligence or Willful Misconduct on the part of the customer to result in responsibility to pay punitive licensing fees, which can sometimes be inflated by several hundred thousand if not millions of dollars.  Strong audit protections should also include provisions that govern the notice period (suggest 90 days, not the standard 30 in the agreement), as well as a clause that says it should not unreasonably interfere with your business. 

If you find yourself threatened by an Oracle audit or would simply like to protect yourself from the risk of one, contact NET(net) and speak to a subject matter expert.  We've been working these issues since 2002 for hundreds of clients and thousands of Oracle deals, so we've picked up a few things along the way that will help you.

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