CITYOF ~SAN JOSECAPITAL OF SILICON VALLEY

COUNCIL AGENDA: 02/15/05

ITEM: 3.b

Memorandum

TO: HONORABLE MAYOR ANDCITY COUNCIL

FROM: Jim McBrideJames R. HelmerScott P. Johnson

SUBJECT: SOFTWARE LICENSE AND SERVICESAGREEMENT WITH ORACLE, INC.

DATE: February 8, 2005

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RECOMMENDATION

Adoption of a resolution authorizing the Director of General Services to negotiate and execute aSoftware License and Maintenance Agreement with Oracle, Inc. (Redwood City, CA) forexpanded licensing and an optional five year maintenance plan, at a total cost of $2,676,056,with an initial licensing cost of $532,556, including tax.

BACKGROUND

On June 24, 1997, the City Council approved Resolution No. 67522 for a Citywide LicenseAgreement with Oracle, Inc. in the amount of$I,700,000. Subsequently, on November 28,2000, the City Council approved Resolution No. 70030 for expanded licensing and five-yearmaintenance agreement with Oracle at a total cost of $2,200,000.

Oracle software is currently used enterprise-wide to provide relational database technology forSan Jose's. mission critical technology systems. Relational database technology is the industry-accepted method of storing an organization's information assets (data), and providing safe,secure, and reliable access to it through other application interfaces. Oracle is the City standardfor relational database software per the Municipal Code (standardization memorandum attached).Below, is a list that illustrates some, but not all, of the enterprise applications where Oraclesoftware is currently used.

1. Public Safety Computer Aided Dispatch (CAD)2. Financial Management System (FMS)3. San Jose Permits Online (AMANDA)4. PeopleSoft HR/Payroll and timecard entry5. Retirement Accounts6. Airport Master Plan Project7. Capital Improvement Project Tracking System

HONORABLE MAYOR AND CITY COUNCILFebruary 8, 2005Subject: Software License and Maintenance Agreement with Oracle, Inc.Page 2

The current five-year agreement with Oracle expires on February 28,2005. Staff commencednegotiations for a new agreement in early October 2004. The negotiations team included thefollowing participants:

Gary Zouzoulas, Interim Assistant Chief Information OfficerCameron Cleland, Division Manager, Information Technology Department (ITD)Steve Turner, Division Manager, ITDJo Zientek, Administrative Officer, ITDVijay Sammeta, Network Operations Manager, ITDMaria Contreras-Tanori, Senior Analyst, General Services DepartmentDorothy McLaughlin, Supervising Applications Analyst, ITD-CUSP ProjectDanette Espitia, Supervising Applications Analyst, ITD-AirportMargie Zamora, Acting Supervising Applications Analyst, ITD-Public Safety

The objectives for the negotiation included the following:. procure a new licensing configuration which would allow all City employees to use labor-

saving on-line timecard entry and the self-service features of the PeopleSoft HumanResource system;

. leverage the City's purchasing power by buying new licenses for upcoming projects (UtilityBilling/CUSP), E-government, and GIS deployment at the maximum discount possible;

. reduce or eliminate the annual 4% cost of living adjustment (COLA) on support andmaintenance costs; and

. accommodate the City's increased license requirements at equal or reduced annual supportcosts.

ANALYSIS

The City's negotiation team determined that the current Oracle license structure of 4,000 NamedUsers and other related Oracle products was no longer adequate because it did not provideenough flexibility or growth potential for new users and applications for flexibility or growth.Therefore, staff worked with Oracle to explore various licensing models with the objective ofexpanding and optimizing licensing to provide the most flexibility at the best price. Staffinitially researched several different licensing options with Oracle:

1. Unlimited User (site/enterprise licensing);2. IndividuallNamed User (license required for each individual user); and3. Central Processing Unit "CPU" (license for hardware running Oracle).

It was determined that option 1 (Unlimited Use) would be cost prohibitive. It was alsodetermined that option 2 only offered limited flexibility to meet the City's needs and would beexpensive. Licensing by CPU, option 3, is cost effective only if fifty or more users are attachedto the CPU (break even point).

HONORABLE MAYOR AND CITY COUNCILFebruary 8, 2005Subject: Software License and Maintenance Agreement with Oracle, Inc.Page 3

The final licensing solution that has been negotiated with Oracle is a combination of options 2and 3, IndividuallNamed User and CPU licensing solutions. This model best meets the City'srequirements for flexibility, expandability and cost effectiveness. It is a model currently used byother government agencies such as Los Angeles County and Santa Clara County. In addition,Oracle's proposal to the City offers equivalent or superior pricing than these other agenciesreceived. Staff presented the proposal to the ITPB on January 20,2005. The ITPB foresaw noissues with the proposal.

As mentioned previously, the additional licenses and maintenance under the current Named Userlicense model is less flexible and more expensive with a total five-year cost of $3,187,044. Thenegotiated pricing model provides the required flexibility and better pricing with a total five-yearcost of $2,676,056 and includes the following benefits:

. 58% discount offlist price on license and support (compared to 40% maximum from theState GSA discount)Fixed cost of $428,700 on annual support for five years (0% escalator clause compared to4% previous escalator)Price guarantee for 18months at 50% offlist for any new licenses purchased (compared tono price hold on State GSA, only volume pricing)No Named User minimums per CPU on all development and test environmentsOne year grace period to migrate Enterprise Edition Database users over to Standard EditionDatabase users

Cost savings of$5ll,000 off City's current pricing structure

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Below is a price comparison between the existing licensing model and the recommended option.

Existi N dU Li Model

C b' 0 .. b CPU/N dU Model

IUs important to note that the proposed agreement has a provision that allows the City toterminate the agreement if the City is not able to appropriate the funds in any of the subsequentyears. Furthermore, in the event that the City's requirements change during the five-year term ofthe agreement, staff would have the ability to renegotiate with Oracle at any time.

License cost Year 1 Year 2 Year3 Year 4 Year 5Description (7/1/05) (7/1/06) (7/1/07) (7/1/08) (7/1/09) TotalNew Licenses $571,560 -- -- -- -- -- $ 571,560Support -- $482,889 $502,205 $522,293 $543,185 $564,912 $2,615,484

Total $571,560 $482,889 $502,205 $522,293 $543,185 $564,912 $3,187,044

- ----- --- ----- -----License cost Year 1 Year 2 Year3 Year 4 Year 5

Description (7/1/05) (7/1/06) (7/1/07) (7/1/08) (7/1/09) TotalNew Licenses $532,556 -- -- -- -- -- $ 532,556Support -- $428,700 $428,700 $428,700 $428,700 $428,700 $2,143,500

Total $532,556 $428,700 $428,700 $428,700 $428,700 $428,700 $2,676,056

HONORABLE MAYOR AND CITY COUNCILFebruary 8, 2005Subject: Software License and Maintenance Agreement with Oracle, Inc.Page 4

ALTERNATIVES

Oracle is used for all of the City's mission critical databases. Deployment of Oracle enterprise-wide has provided the City with the industry-leadingdatabase, and has allowed the City toleverage scarce resources in database support. It would be a major effort to convert to anotherdatabase product resulting in significant hardware, software and labor costs, taking more than ayear of effort, and causing a major disruption of service. Further, the City is fully satisfied withthe Oracle product.

PUBLIC OUTREACH

Not applicable.

COORDINATION

This memorandum has been coordinated with the departments of Finance, Airport, and Police,and the Offices of the City Attorney and Budget.

COST IMPLICATIONS

This Council item is consistent with General Principle #2, "We must focus on protecting ourvital core city services", and Item #7 "We must continue to streamline, innovate, and simplifyour operations.. .so that we can deliver services at a higher quality level, with better flexibility, ata lower cost." The costs of the software license and maintenance agreements with Oracle, Inc,will be spread among the various funds that would benefit from the services.

BUDGET REFERENCE

Fund # Appn. # Appn. Name Total Appn. Amount For 2004-2005 Last BudgetContract. Adopted Action

Operating (Date, Ord.Budget (page) No.)

001 0432 NP/Equip-Info Tech 3,328,665 330,556 VIII - 84523 0802 NPlEquip-Airport 33,820,320 34,000 Xl-3 10/12/04-

Ord No.27267

423 3320 CUSP Project 4,389,242 168,000 XI - 38 1217/04

HONORABLE MAYOR AND CITY COUNCILFebruary 8, 2005Subject: Software License and Maintenance Agreement with Oracle, Inc.Page 5

CEQA

~~;~~?irector

Information Technology

SCOTTP.IODirectorFinance Department

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CITYOF~SAN JOSECAPITAL OF SILICON VALLEY

Memorandum

TO: Jim McBride, Interim DirectorGeneral Services Department

FROM: Anna J. Jatczak

SUBJECT: Request for StandardizationOf Enterprise Databases to Oracle

DATE: February 6, 2005

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The Oracle database is the foundation for all of the City's enterprise systems, including CAD,AIS, HR/Payroll and On-line timecard entry, Retirement, SJ Permits Online, Data Warehousing,Airport Master Plan, FMS and CIP. Over $1OMhas been invested in these systemsand selectinga different database would require a multi-million dollar investment.

Due to the increased use of technology in the organization, the City of San Jose's Oracledatabase license inventory has grown to 4,000 licenses. In order to limit overall costs, theInformation Technology Department requests utilizing a single vendor of databases forEnterprise needs.

Below are the reasons for Standardization:

. Oracle database technology can run on most hardware platforms unlike other popularalternatives and can scale from the desktop to the enterprise-level.

. With approximately 100 Oracle-based applications across the organization, there hasbeen a technology base built over the last few years with respect to programming Oracledatabases, by both training and hands-on experience. There are approximately 25 Oracleprogrammers working in ITD and other City departments. Thousands of hours would berequired to learn new techniques if the City chose to change to a new database vendor.

. There are approximately 50 servers citywide with Oracle database software installed andover 100 database instances on those servers hosting data for approximately 100applications. Purchasing, installing, testing and implementing alternative databasetechnology would be a large undertaking and in some cases would require purchasingnew servers and applications in addition to new databases. Our larger applications, suchas Payroll and FMS would take an estimated one-year of work by a dedicated staff withlarge outlays of new license investment to convert away from Oracle.

. Oracle is recognized as a major provider of database systems and a great majority ofcommercially available "off the shelf' software is tested to be compatible with Oracledatabases.

. The Oracle database is the foundation for all of the City's enterprise systems. Over$10M has been invested in these systems and selecting a different database would requirea multi-million dollar investment and immeasurable staff hours of training. In addition,the Citywouldbe unableto addCUSPandSelf-Servicebenefits. .

The Purchasing Division supports the Information Technology Department's justification andrequests that Standardization be approved for Oracle as the Enterprise Database.

Anna 1. Jatcz

Deputy Director,

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