ISVs looking for a database for their hosted solutions may be drawn to the Oracle Database as a complete package. It offers a multi-tenant feature that allows a single instance of a software application to serve multiple customers. Combine this with all the features and options added by Oracle over recent years including reliability, scalability, performance and security, many ISVs conclude that technically Oracle Database is one of the most capable databases to provision a hosted application in a SaaS solution.
But before signing on the dotted line, ISVs are advised to read their contract closely. We explain why.
Oracle sells and delivers its on premise and cloud solutions by making use of two different standard agreements:
Both agreements specify in the Rights Granted section that you can only use the Oracle programs or Oracle Cloud Services for your internal business operations. We’ve highlighted the relevant parts of the contracts below:
Upon Oracle’s acceptance of Your order, You have the non-exclusive, non-assignable, royalty free, perpetual (unless otherwise specified in the order), limited right to use the Programs and receive any Program-related Service Offerings You ordered solely for Your internal business operations and subject to the terms of the Master Agreement, including the definitions and rules set forth in the order and the Program Documentation.
We will make the Oracle services listed in Your order (the “Services”) available to You pursuant to this Agreement and Your order. Except as otherwise stated in this Agreement or Your order, You have the non-exclusive, worldwide, limited right to use the Services during the period defined in Your order, unless earlier terminated in accordance with this Agreement or Your order (the “Services Period”), solely for Your internal business operations. You may allow Your Users (as defined below) to use the Services for this purpose, and You are responsible for their compliance with this Agreement and Your order.
The actual meaning of “internal business operations” is not defined in the agreements itself. The lack of clarity on what this means often results in discussions with Oracle at a later stage, particularly if especially a customer is using the software to provide hosting services for end-users.
Many ISVs fall foul of this, believing that as their business operations are to provide hosting services to end users, they are allowed to use the Oracle Database for this very purpose. But they’d be in breach of contract.
If you’re an ISV or someone who provides hosting services, you should have non-standard “hosting rights” granted into your Oracle agreement which allows you to host the Oracle software for the business operations of third parties (your end-users). If the Oracle software is embedded or part of your application/solution and distributed to the premises of your end-user, you would need to have a distribution agreement in place with Oracle. This will allow you to distribute the software to end-users through an Embedded Software License Distribution Agreement or an Application Specific Full Use Distribution Agreement.
If you plan to host your solution on your datacenter for your end-users, you should obtain Proprietary Application Hosting licenses from Oracle in which specific “Internet Hosting” use rights are granted, specifying something similar to the below:
These programs may only be used in conjunction with your proprietary application as defined on the Proprietary Application Hosting Registration Form (“PAHRF”). It is agreed that you shall have the right to use the limited use proprietary programs as defined and licensed under the Ordering Document for the purpose of providing internet hosting services to end-users, and only in conjunction with your proprietary application.
In case you are planning to host your solution on Oracle Cloud for your end-users you should obtain language in your agreement which specifies something similar to the below:
Your right to use the Services for Your internal business operations includes the right to use the IaaS and/or PaaS Cloud Services (each, as described in the applicable service descriptions) You have purchased on this order (a) to provide to Users Your service which runs on those IaaS and/or PaaS Cloud Services ("Your Solution") and (b) to allow Your Solution to be accessed by such Users in furtherance of Your or their business purposes.
In our day-to-day practice, we often see end user organizations and even Oracle representatives not being aware of the fact that the Cloud Services Agreement (CSA) would require these adjusted use rights to allow an ISV to use the cloud services for “hosting purposes” as the standard terms and conditions of the CSA do not allow such usage. If you entered into an agreement like this in the past, it is worth checking that you have the right terms and conditions included in your agreement with Oracle. If you don’t, you could find yourself at risk of fines.
Please obtain advice from your legal team at all times before signing any contract. The suggested contractual language in this blog is for illustrative purposes only.
Even though the technical capabilities of the Oracle Database make it one of the most suitable database platforms to deliver your proprietary application as a hosted solution for your end-users, the standard contractual terms and conditions do not allow such use. You are required to obtain necessary, non-standard terms and conditions in your agreement(s) to allow you as an ISV to use the Oracle software or Oracle Cloud services as a hosted solution for your end users.
Do you need to negotiate a new contract for your Oracle Database? Get in touch with us to learn what you need to include in your contract and be prepared.
Do you need to negotiate a new contract for your Oracle Database? Get in touch with us to learn what you need to include in your contract and be prepared.
