Every software audit ends with one table. On one side, what you are entitled to use. On the other, what you actually deployed. The difference is your effective license position, or ELP, and the vendor’s auditors will build one for you if you have not built your own. Theirs will not give you the benefit of the doubt.
This guide explains what goes into an ELP, works through an Oracle Database example with real list prices, and lists the mistakes that turn a small gap into a large bill.
In short
- An effective license position compares, product by product, the licences you own with the licences your deployment needs. The result is a surplus or a shortfall for each product.
- Entitlements come from contracts and order documents. Deployment comes from discovery tools and scripts. The licensing rules in between decide how one becomes the other.
- For Oracle, the rules include the core factor, minimums per processor and option usage. At Oracle’s 15 September 2026 list prices, a gap of 12 Database Enterprise Edition processors is US$570,000 in licences before support.
- An ELP is a snapshot. It is only useful if it is current when the vendor asks.
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The calculation
The arithmetic is simple. Licences owned, minus licences required, equals the position. SAM tools call this step software license reconciliation. All the work is in getting the two inputs right.
| Input | Where it comes from | What goes wrong |
|---|---|---|
| Entitlements: what you own | Contracts, ordering documents, licence certificates, support renewals | Licences bought by a subsidiary, dropped from support, or tied to a migrated product are missed |
| Deployment: what is installed and used | Discovery tools, vendor scripts, virtualisation and cloud consoles | Servers outside the tool’s reach, standby systems and test copies are missed |
| Licensing rules: how deployment becomes a licence count | The vendor’s price list, policies and your contract’s terms | The wrong metric, core factor or minimum is applied |
A worked example: Oracle Database Enterprise Edition
What the company owns
Twenty processor licences of Oracle Database Enterprise Edition, and ten of the Diagnostics Pack, all under current support.
What is deployed
Two production servers, each with two 16-core Intel Xeon processors. That is 64 cores. Oracle’s core factor for Intel Xeon is 0.5, so 64 x 0.5 = 32 processor licences required. The database’s own feature usage records show the Diagnostics Pack and the Partitioning option in use on both servers.
The position
| Product | Owned / needed | Short by | At list (US$) |
|---|---|---|---|
| Database Enterprise Edition | 20 / 32 | 12 | 570,000 |
| Diagnostics Pack | 10 / 32 | 22 | 165,000 |
| Partitioning | 0 / 32 | 32 | 368,000 |
Prices are per processor from Oracle’s Technology Global Price List of 15 September 2026: Enterprise Edition US$47,500, Diagnostics Pack US$7,500, Partitioning US$11,500. Annual support adds 22% of the net licence fee. In an audit, Oracle also asks for back support on the shortfall, which is why the same gap costs more when Oracle finds it than when you do.
Now the useful part. Partitioning may have been switched on by an administrator testing a feature years ago. If it is not needed, it can be removed and the usage explained. The two servers may be in a cluster that could be split. Each of those is a decision you can only make if you see the position first. Our page on the Oracle core factor table explains the processor maths, and disabling Oracle options and packs shows how to stop unwanted usage being recorded.
Where an ELP is different for each publisher
- Oracle: processors are counted with the core factor, Named User Plus licences have minimums per processor, and options and packs are licensed separately even when installed by default.
- Microsoft: the position depends on which agreement and which product use rights apply, and on whether licences carry Software Assurance.
- IBM: the position for Processor Value Unit products depends on sub-capacity rules and the reports your tooling keeps.
- Broadcom VMware: since the move to subscriptions, the position is about subscribed cores against deployed cores.
The method is the same in each case. The rules are not, which is why a tool’s default report is a starting point and not a position.
Mistakes we find in effective license positions
- Counting installations instead of licence requirements. Forty installations of a database on a VMware cluster can need far more, or fewer, licences than forty.
- Missing entitlements. Licences bought by an acquired company, or on an old support contract, are real but often absent from the records.
- Ignoring options and packs. They are the most common gap in Oracle positions we review.
- Treating disaster recovery as free. Some standby arrangements need full licences. Check the rule before you assume.
- Building it once. An ELP from last year does not reflect this year’s servers.
Our baseline Oracle license review builds the position for Oracle estates, and our software asset management services keep it current across publishers. If your tool is changing, see what the Snow Software migration means for your position.
Questions we are asked about effective license positions
What is an effective license position?
A product-by-product comparison of the licences you own with the licences your deployment requires, showing a surplus or a shortfall for each.
How often should we produce an ELP?
At least once a year for each major publisher, and before any renewal, audit, merger or large infrastructure change.
Can a SAM tool produce the ELP for us?
A tool produces the deployment side and can hold the entitlements. The licensing rules, especially for Oracle and IBM, still need someone who knows them to check the result before it is relied on.
Should we share our ELP with the vendor?
Not by default. It is your own analysis. In an audit you provide what the contract requires, and your ELP tells you what that data will show before you send it.
Anil Nahata
Co-founder of Rythium Technologies and its designated partner since 2015. Anil co-leads Rythium’s practice, bringing deep software asset management and commercial negotiation experience across Oracle, Microsoft and the wider publisher landscape.
Before Rythium, Vice President heading the telecom towers infrastructure business at Reliance Communications, and its group Chief Procurement Officer. More than two decades across the telecom, software and financial industries.
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