Updated: Mar 28, 2019
The Perpetual Unlimited Licensing Agreement (PULA) appears to be Oracle’s “power play” for its utility customers. Oracle presents the customer with a business as usual (BAU), based on a 10-year run-rate of an existing or proposed ULA, and from this projects savings available with a PULA.
The PULA eliminates the deployment time restriction of the ULA and minimizes many of the risks associated with unpredictable yearly fees and software audits. However, the risks are greater with a PULA due to the lengthy return on investment that is masked by the payment plan offered
The PULA, and its payment plan, is attractive to utility companies because the offer is based on a payment structure with customized “buckets” of spending. The payment structure moves more cash in the license bucket – CapEx – and less in the support bucket – OpEx. On paper, the customer sees an immediate cost reduction on support. This is very attractive to the utilities; they try to keep OpEx as low as possible and, at the same time, are able to pass on CapEx to their customers.
Here’s the catch: the PULA’s 10-year cost is very high. Payments include finance costs in the “license” bucket, which do not carry support fees, extending the illusion of lower support costs. Also, the (vendor-supplied) BAU assumes the signing of two or three new ULAs, with 5- or 3-year terms. The BAU and the offer of the PULA is presented before clients have completed the in-house work to assess one additional ULA, much less two or three.
The payment structure of the PULA becomes a distraction, shifting client focus from looking at the inherent value of the agreement. The same PULA benefits can be achieved with a right-sized BAU. It’s like buying a Tesla and arguing that after 10 years, it’s more cost effective than buying a new Porsche every few years. Hold on, who said I could afford a Porsche in the first place, let alone one every three years?
The PULA can be advantageous for utility customers, just like its sister, the ULA, but the buyer must beware of the somewhat fuzzy math implicit in a vendor-supplied BAU. Customers must understand the inner workings of the PULA and devise a strategy for a right-sized PULA, or other agreement structure that provides long-term value. Just like when buying a new car, one doesn’t talk lease payments or trade-in value until you have negotiated the price of the new car; similarly, customers must determine the true cost and value of the PULA before making a commitment to this structure.