Cloud computing is growing in popularity within enterprises. Software licensing is a challenge under normal circumstances - but what happens when you move a part or all of your databases and applications to the cloud? Many software vendors' product licensing rules do not neatly fit within the dynamics of cloud computing models or with the complexities of hybrid environments in which some processes are in the cloud and others are on-premise (or the even more complex environment in which these are integrated).

In much the same way that virtualization complicates software license acquisition and compliance practices, licensing policies promise to be even more puzzling in the cloud computing environment as vendors and customers must navigate new territories. This article will discuss the impact that cloud services can have on attempting to maintain licensing compliance.

Vendors such as Microsoft and Oracle have had different approaches to cloud computing. Note that unlike Microsoft, which has made a major commitment to providing cloud-based services, Oracle itself has not decided to follow by providing public cloud computing services of its own. However, Oracle supports the use of cloud computing services through Amazon's Cloud Services offering as well as other solutions such as Rackspace Cloud.

To illustrate the intricacies involved in software licensing in the cloud, let's examine Amazon's Cloud Services environment for an Oracle deployment. Amazon EC2 is Amazon's cloud infrastructure, which enables clients to rent computing power and storage. What is generally called the Amazon cloud environment has two distinct components: the Amazon Elastic Compute Cloud (EC2) and the Amazon Simple Storage Services (S3). A customer can use the S3 storage services even if they aren't using Amazon's Cloud (EC2) by sending their earth-based database backups to the S3 storage in the Amazon cloud. Oracle has partnered with Amazon to enable customers to use the cloud by providing a pre-packaged Amazon Machine Image (AMI) containing Oracle Enterprise Linux 4 and Oracle Database 11g (Oracle allows the use of all supported Oracle e-versions, from Oracle 9i to Oracle 11.2 on the Amazon cloud). While Oracle will support its own software (Oracle Enterprise Linux, Oracle Database, Middleware and Enterprise Manager), it doesn't control or manage the storage tier, which lies completely in Amazon's domain. Users must secure Amazon's Premium Service to ensure they get official support for the storage (and backup) tier.

As an Oracle customer contemplating cloud servers, one might ask: "So what licensing is required? Which level? Which metrics? How many?" The answers remain elusive because beyond the existing factors in determining licensing requirements (e.g., user count, Internet access, and/or environment), the requirements for calculating software licensing is heavily dependent on each particular cloud vendor's service. The use of an Oracle solution with the Amazon cloud service again serves as a good example of how potentially complicated it can become to identify proper software licensing.

The concept of an EC2 instance lies at the heart of licensing Oracle software within an Amazon cloud. Oracle uses an EC2 instance to calculate what processing power an Oracle product can actually access through the determination of EC2 Compute Units (ECU). Amazon offers seven different instance types based on the number of virtual cores, allocated memory and EC2 Compute Units (ECU) per core. A single ECU provides an equivalent CPU power of a 1.0 - 1.2 GHz 2007 Opteron or 2007 Xeon processor. The power of an entire instance (total EC2 Compute Units per instance) can be calculated by multiplying the number of virtual cores supplied with that instance type by its ECU per virtual core.

To determine Oracle licensing costs, the processor usage must be converted into the usage of virtual cores in the cloud. With the Amazon service, Oracle's licensing rules dictate that for purposes of Database Standard Edition, 1-4 Virtual cores=1 CPU license and 5-8 Virtual Cores=2 CPU licenses. For the purposes of Database Enterprise Edition, each virtual core is considered a physical core, but multi-core factoring is still applied so one virtual core may not equate to one CPU License. Because the customer typically does not have access to the underlying server specifications, the number of virtual cores can be related to the actual maximum physical cores they are allowed to use. (Special consideration: Amazon currently only supports solutions that run on Linux, Windows Server 2003/2008, and OpenSolaris platforms.) Amazon currently equates their "EC2 Compute Unit" to Intel processors.

With the underlying server specifications unknown to cloud services customers, Oracle has also developed new rules for Database Standard Edition and Standard Edition One database solutions. Pricing of Oracle Database Standard Edition (SE) or Oracle Database Standard Edition One is based on the EC2 instance size. Oracle Database Standard Edition One can be licensed only for EC2 instances that don't exceed eight virtual cores. Oracle Database Standard Edition can be licensed only for EC2 instances that don't exceed sixteen virtual cores. Oracle does not apply any limitation to the number of cores for Database Enterprise Edition. It's also important to note that Oracle also has some special conditions regarding the use of licenses under an Oracle ULA within an Amazon cloud environment, which may impact their long-term software licensing requirements.

Fast-forward 12 to 18 months where the utilization of a recently deployed cloud-based application has grown far more than anticipated. This is determined to be causing performance issues that can easily be remedied with additional computing resources: CPU, memory, etc. Meanwhile, the capacity of the on-premise systems is being strained as new features and functionality of the application are being developed and tested, making this environment a candidate for the cloud. When planning for this upgrade and expansion, software licensing must be considered. A review of the license quantities, metrics, levels, limitations and other factors is essential. Questions that must be asked and answered include: Are the proper software editions installed? Are the right license types in place? Are there a sufficient number of them? Is the growth rate expected to stabilize or remain at the same level? Given the projected growth, are there better licensing strategies that can be employed? Will surplus licensure result from these strategies? And, most important, how can the environment be licensed at a reasonable, budgeted cost?

In addition to Oracle software licensing requirements, customers must, of course, pay for their usage of Amazon's cloud services, based on their usage of those services. In addition, the cost of Amazon Premium Support must also be taken into account when comparing the cost of cloud computing services as an alternative to on-premise or hosted configurations.

From a licensing perspective it's extremely important for an organization to have any and all software licensing requirements and details explained and included within their cloud services contracts. In all cases, it's crucial to ensure a full understanding of the licensing requirements for a specific deployment in a traditional, on-premise environment versus a cloud environment. This enables a more accurate comparison of the associated costs. The differences in licensing rules between these environments should be satisfactorily explained. Time requirements, in particular, must be established to allow for a multi-year cost projection to be formulated. Usage rules (i.e., adding or subtracting users) must be clearly stated. An organization must understand what software licensing is included within the cloud services subscription and what is not. It's also very important to understand, prior to signing any agreement(s), the software licensing calculations required by the vendor whose software you intend to run within the cloud infrastructure. In other words, the licensing requirements for the software must be vetted by the vendor or by a qualified software licensing expert.

As previously described within this article, Oracle has very particular licensing requirements and calculations when utilizing its products on an Amazon EC2 environment. This is very different from how Microsoft handles the software licensing within its own cloud services known as Azure. All of the licensing for Microsoft products are part of the cloud services contract and can be combined with the licensing of some on-premise Microsoft applications.