Term vs. Perpetual Licensing—When Does Choosing a Term License Make More Sense Than a Perpetual License?

Update: As of September 1, 2020, Oracle discontinued the option of purchasing on-premise term licenses (1-5 years), with the exception of some key technology products which may still be purchased on 1-year term licensing.

If you’re anticipating the need for additional Oracle licensing and your budget is small, you may be better off with a term license.  Depending on the business need – it may work out to your business’ benefit.

What exactly is a term license? Oracle, for example, generally offers a one, two, three, four or even five-year term license. These licenses can be extended by purchasing an additional term or a perpetual license. The cost of a term license depends upon its length in time and, of course, its use.

Many software licenses specify a limited time period or term during which the user will be permitted to use the software. At the end of the term, you must stop using the software unless a new license is purchased or the term is extended through an agreement with the software provider.

HOWEVER, there is a caveat, which is why it’s important to know ahead of time how the licenses you need will be used. Term licensing‘s annual support costs are always calculated per Oracle‘s perpetual price, not the term license price, so you‘ll pay proportionally more for annual support with a term license than you would for the same perpetual license.

As an example, if your company has taken on a project and has the need for additional licenses for contract employees for an 18-month period – term licensing would be the way to go. If you foresee those licenses being needed in the future for additional projects or growth of the company, a perpetual license would be more effective to cut down on the additional support costs.

Depending upon your requirements and the future business environment, it is important to weigh the difference between a term license and an ongoing perpetual license, including the restrictions, support and implementation costs, the likelihood of potential business changes and the impact on the current and future environment. If the proper planning is put in place, it can result in significant cost savings.

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