From User & Processor based licensing to Employee-Based Licensing

This document outlines the recent changes to Oracle’s Java licensing structure and explores potential alternatives for businesses.

Introduction to the Shifting Landscape

In January 2023, Oracle significantly altered its Java licensing model. Previously, pricing was based on traditional licensing metrics of Processor & Named User Plus (NUP). This allowed customers to understand the commercial value of Java based on its deployment.

The new pricing structure implements an “employee license” system. The implication is that even if one employee has installed Oracle’s commercial Java on his/her computer, the company becomes liable to pay for all its employees. And, employees here includes those who are on roll and also other outsourcers, contractors and agents who are working for or on behalf of the company.

Impact of the Java license changes on businesses:

The change in the pricing structure is causing significant cost increases for many customers. The increase is variously calculated between 4X to 50X of the actual usage.

Key Points of the New Licensing Model:

• Pricing is determined by total employee count, regardless of Java usage or hardware deployment.
• The Java SE Universal Subscription program reflects these changes, with prices varying from $15 per employee per month (up to 999 employees) to $5.25 per employee per month (40,000-49,999 users).
• Oracle’s example highlights a company of 28,000 employees (including full-time, part-time, contractors, etc.) facing an annual cost of $2.268 million, regardless of individual Java usage.

What is the future?

The new licensing structure has prompted a surge in customers seeking alternatives. Customers are moving away from Oracle Java.

Gartner – amongst other IT industry experts, has predicted that over 80% of Java applications will transition to third-party runtimes by 2026, compared to 65% in 2023.

Oracle’s Response

Oracle is actively attempting to retain customers through multi-year contracts that lock in subscription revenue.

We have seen 5-year contracts and recently there was talk of a 10 year contract.

Oracle is looking to make this business larger than its database business. Analysing their FY24 Q3 results seems to show that Java revenue is around $2 billion annually following the licensing change.

Recommendations for Businesses:

• Look at alternatives:
  • Several viable options exist, including Azul Platform Core, Amazon Corretto, Eclipse Temurin, Red Hat or even Oracle OpenJDK. Companies can achieve significant cost savings, improved support, and greater flexibility by migrating to these alternatives.
• Avoid long-term commitments. Short-term contracts with Oracle might be preferable, providing time for a well-planned migration to a cost-effective alternative.

Conclusion:

The recent Oracle Java licensing changes have altered the landscape for businesses. By carefully considering alternative providers and negotiating strategically, companies can navigate this shift and ensure optimal cost management.

We have seen customers saving upwards of 70% by migrating to non-Oracle Java.