New Oracle Java licensing changes could increase your bill 30-fold

If you’re an Oracle user, take note. Oracle recently announced a significant change to its subscription model and global price list that will have a huge financial impact on almost any end user organisation, with a potential 30-fold increase in the current pricing model.

What is the change?

On 24 January 2023, Oracle released a new Oracle Java SE Universal Subscription Global Price List and stated it will no longer sell the Oracle Java SE subscriptions on a Named User Plus licensemodel (for clients or laptops/desktops) or Processor license model (for licensable deployments on servers including virtual, physical and cloud instances) metrics. Instead, Oracle will continue to sell its Oracle Java SE subscriptions on an Employee for Java SE Universal Subscription metric.

What does this mean?

Under the old model:

• the more licensable deployments you had, the more subscriptions you would require
• the larger the servers on which you had licensable deployments, the more subscriptions you would require

To reduce their costs, many end user organisations deinstalled licensable versions of Oracle Java, downgraded licensable versions of Oracle Java to a public update version, consolidated their Oracle Java deployments to a smaller number of machines or implemented storage and network isolation for deployments on VMware.

Under the new model - Employee for Java SE Universal Subscription – the quantity of licenses required is determined by the total number of employees in an organisation, not just the actual number of employees that use the programs. Eligible employees are defined by Oracle as:

• all your full-time, part-time, temporary employees, and
• all the full-time employees, part-time employees and temporary employees of your agents, contractors, outsourcers, and consultants that support your internal business operations.

For these Java SE Universal Subscription licenses, the licensed quantity purchased must, at a minimum, be equal to the number of Employees as of the effective date of your order. Under this Employee metric for Java SE Universal Subscription Programs(s), you may only install and/or run the Java SE Universal Subscription Program(s) on up to 50,000 processors. If your use exceeds 50,000 processors, exclusive of processors installed and/or running on desktop and laptop computers, you must obtain an additional license from Oracle.

Under this new model:

• The number of licensable deployments is no longer relevant; if you have one or more licensable deployments, you will be required to have a subscription for all your employees.
• The underlying hardware infrastructure and its associated number of processors is no longer relevant. If you have one or more licensable deployments, you will be required to have a subscription for all your employees.
• Only the individuals within an external party (for example, outsourcers, agents, contractors, consultants) that support your business operations should be counted as an employee, not all the employees of your outsourcer.
• If your total infrastructure exceeds more than 50,000 processors (for example, more than 100,000 Intel Xeon Cores), you need to enter into a good faith commercial negotiation with Oracle Sales to agree on appropriate pricing.

How does the new pricing and licensing model work?

The table below provides an overview of the net monthly subscription price per employee per month, depending on the number of employees required. The larger the number of employee subscriptions required, the lower the monthly subscription fee per employee.

The financial impact of this change

Using a real customer scenario, an end user who has 214 processors and 1105 clients on which it wants to deploy licensable versions of Oracle Java. Under the old licensing and pricing model, the annual subscription fees for the client would be USD 85,000. However, the end user has 42,000 employees within its organization. Under the new licensing and pricing model, the annual subscription fee for the client will be 42,000 x 5,25 x 12 (months) = USD 2,646,000. This is an increase in price more than 30 times the fee applicable under the old model!

Does this impact existing Named User Plus or Processor based subscriptions?

End user organisations that already have a Java SE subscription agreement based on the older Named User Plus and/or Processor licensing and pricing model do not need to do anything at this moment in time. Oracle will honour the contractually agreed terms and conditions.

End users should, however, realise the moment the subscription agreement expires, Oracle may require you to move to the new Employee based licensing and pricing model. Although Oracle specifies in its FAQ document that existing Java SE subscription customers may renew under their existing terms and metrics, this document is not contractually binding. End users that have historically licensed a subset of their infrastructure, have not entered into an unlimited subscription agreement, and didn’t agree on any non-standard terms for expansion or renewal of the initial subscriptions, will most likely be required to move to the new Employee based model.

What alternative options are available?

The employee wide licensing model is expensive. Before we look at alternatives, it’s worth understanding Oracles ‘migrate or pay to stay’ approach to different Oracle Java releases that are made available.

Every updated version of every Oracle Java release, is either classified as:

• a public update (and as such does not require a separate subscription) OR
• a commercial (payable) update (and as such does require a separate subscription) 

The table below provides an overview of the final public updates of the most common releases and associated implications:

As of Oracle Java Release 17, the Oracle Java SE programs are distributed under the so called No Fee Terms and Conditions (NFTC) agreement. This means that if you deploy and use Oracle Java Release 17, it is free of charge for commercial end users.

But, following the ‘migrate or pay to stay’ approach, the final free commercial-use update for Java Release 17 will be made available in September 2024. After this date, if you want to continue to make use of security patches and updates for Java Release 17, you must obtain a subscription agreement from Oracle. Paid support for Oracle Java Release 17 will be made available through 2029. If you want to avoid this cost, you should migrate to Java Release 21 before September 2024, which will be made available in September 2023.

Based on this, your alternative options to avoid the employee-based licensing model are:

• upgrade to Oracle Java Release 17 and comply with the release cycle of every 2 years, continuing to leverage Oracle’s No Fee Terms and Conditions Agreement; upgrade for all Java deployments to Java Release 21 should take place before September 2024.
• stay on the latest available public update for a specific Oracle Java release
• migrate to OpenJDK as the open-source alternative for Oracle’s Java build (with or without a third-party support contract from another publisher like Azul Systems).
• transform your on-premises, Amazon or Azure cloud deployments to Oracle Cloud Infrastructure (as Oracle’s Cloud customers get a free Oracle Java SE license for their instances in the Oracle public cloud)

Will my Oracle Verified Tool for Oracle Java SE be of any help?

Oracle recently verified a number of third party SAM tools for Java SE (including Flexera, Lime Software, Metrix 42 and USU). These tools will make it possible to collect the installation and usage data of Oracle Java programs, like what Oracle would do during an official audit. The installation and usage data gathered from these tools will still need to be analysed to assess the actual license requirements. Your SAM tool will, for example, not be able to validate if a specific licensable Oracle Java install is already licensed through the application provider that provided the application making use of the licensable Oracle Java install.

When end users make use of a verified tool, it will make the data gathering for Oracle much easier, but you will continue to have the burden to prove that any licensable install of Oracle Java SE found is already licensed through your application provider. Oracle has a list of application providers that have the right to distribute commercial updates of Oracle Java SE but will not share this list with you as these agreements are bound by confidentiality agreements.