Contra Costa County is less than 100 miles from the state capital in Sacramento, Calif., but when it comes to software licensing agreements, the two jurisdictions are worlds apart.

California's infamous deal with Oracle rocked state government and led to the dismissal of Gov. Gray Davis' highest ranking IT executives, as well as playing the final-nail-in-the-coffin role in the shutdown of the Department of Information Technology. But in Contra Costa County, the tone is decidedly different.

CIO Steven Steinbrecher has nothing but praise for how his department and Oracle worked together to fashion an enterprise licensing agreement (ELA) that will save the county an estimated $750,000 over the life of the four-year contract.

"Oracle informed us when we reached the magic number [in terms of user volume] making us eligible for an enterprise license, and they worked diligently with us to make it work," Steinbrecher said. "This stuff isn't easy to do."

Granted, the size difference between the two ELA's is large. But both were aiming for the same results - locking in a better price break based on a projected number of users. The big distinction was that Contra Costa counted carefully. California did not.

IT departments in both the public and private sectors are waking up to a new world when it comes to software. Bulk users, such as large corporations and governments, are discovering that software is no longer a commodity, but a service that can be rented, and long-term agreements are the norm, not the exception. Besides Oracle, IBM and Microsoft have been aggressive in converting their software licenses from something that a customer buys to something a customer leases.

The promise of an ELA is that volume software users can save money over the long term. But as California found out, it's important to move carefully with these agreements to ensure what is wanted - nothing more, nothing less.

"Every organization is different when it comes to crafting these agreements, so it's important to know the details of the agreements," said Rock Regan, CIO of Connecticut and president of the National Association of State Chief Information Officers (NASCIO). "The problem is figuring out the details."

Licenses by the Processor

One state that has the details figured out is Delaware.

Like many other governments, Delaware used to purchase user licenses from Oracle for thousands of workers. This approach worked fine so long as an agency could easily manage the number of workers eligible to use the database software. But today's Web-based applications have turned that notion on its head. The number of users who may need to use an application has grown significantly, and their numbers can fluctuate considerably each day.

This year, Delaware signed a processor-based licensing agreement with Oracle worth $2.1 million, said Mark Headd, executive assistant to the secretary of the Department of Technology and Information. The deal allows the state to run Oracle's most current software on as many as 115 processors, but with no limits on the number of users.

"It's really an application license agreement," Headd explained. "Now, anyone can use an application involving Oracle's software as opposed to strict limits on the number of users in the past."

He said the processor-based agreement fits with Gov. Ruth Ann Minner's mission of Web-enabling as many government services and operations as possible.

Trying to predict the number of users of the software down the road was one of the problems California ran into with its ELA. Headd said Delaware used its current numbers as the benchmark and by switching to a processor-based agreement, they ensured the head count issue wouldn't create a problem later on.

"We may have some applications that will only have 50 users and others that are Web-enabled with thousands of users,"

Tod Newcombe  |  Features Editor