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Oracle eases path to cloud with license reuse, universal credits

Phil Wainewright Profile picture for user pwainewright September 19, 2017
Oracle smooths its customers' path to cloud and autonomous database with contracts to bring your own license for PaaS and upfront universal credits

Larry Ellison Oracle Cloud 20-09-2017 370px
Larry Ellison, Oracle

Oracle is today increasing the drumbeat in anticipation of its upcoming OpenWorld conference with new licensing options for customers moving to Oracle Cloud, and claims of a 50% or more price advantage over rival Amazon Web Services (AWS). At a live event earlier at Oracle headquarters, CTO and Chairman Larry Ellison revealed two new programs that will become available from September 25th:

  • Universal Credits — an upfront contract for cloud services that offers discounts of up to 30% in return for committing to a total dollar value, without having to specify in advance which services will be bought.
  • Bring Your Own License to PaaS — expanding the ability to transfer existing on-premise licenses to include Oracle PaaS. As with the equivalent IaaS program, this significantly cuts the cost of adopting Oracle Cloud where customers have already paid for an on-premise license, and extends it to database, middleware and analytics products.

Ellison also reiterated the cost reductions Oracle anticipates from its fully autonomous database, first announced during the company's earnings call last week, which he says will be available in December. Taken together with the contractual changes announced today, this will make PaaS a much more attractive option than IaaS, Ellison says:

Because of all of that automation, we believe — even now, even today — that platform as a service is a better deal than infrastructure as a service. [That's] because labor costs are what you really have to drive out of your data center. Human error is what you really have to drive out of your data center — costs associated with human error. So that the TCO of PaaS today we believe is actually lower than the TCO of infrastructure as a service.

There is a huge opportunity for automation at the database level, at the middleware level, at the analytic level.

Eliminating human labor, error

Making the database "self-driving" cuts costs in half compared to instances that are managed manually, while speeding performance and reducing total downtime to less than 30 minutes per year, he explains. This is achieved by removing the delays and errors that humans introduce:

There's no human labor required to run the latest version of Oracle, to manage the latest version of Oracle. It configures itself. It upgrades itself. It patches itself and it tunes itself, all while running. It can't forget to install a security patch. It can't forget to have a disaster recovery in a different location. It can't forget to back up all of your data at the frequency you need it backed up. It can't forget any of that.

When the security patches are available they immediately go into the system, closing the window for a cyber attack, because you can patch the database while the database is running. This is a huge difference with what the current state of the art is. Eliminating human labor dramatically lowers your costs. Eliminating the human error associated with human labor is even more important.

The 50% cost reduction against hosting the same software at AWS and managing it manually will be guaranteed in the SLA, he says, along with an availability guarantee that restricts total downtime ӣ planned as well as unplanned — to just 30 minutes per year:

We guarantee you our price will be half what it is that Amazon. That's going into the SLA.

This is completely self driving, there's no pilot error possible. If you run the autonomous database we'll guarantee it is up 99.995% of the time and put it in the SLA and give you money back if we don't achieve that goal, that target.

Incredibly simple contract

Adding in the Bring Your Own License program gives a reduction of up to 94% compared to the old PaaS list price, and compared to AWS offers full automation, together with higher performance if customers opt to run on specialized Exadata hardware, says Ellison:

These are dramatic reductions in price from what we offered before. These are huge drops in price.

The same pricing is offered for Cloud at Customer, where Oracle provides and manages the cloud infrastructure in the customer's own data center.

Universal Credits allow customers to secure a discount by committing to an annual or monthly spend, without having to specify in advance exactly what services they'll buy. Ellison explains:

You don't have to figure out what you're going to consume in advance. You just say, 'I'd like to contract for $100,000 worth of cloud services,' and then you use any of our cloud services, on demand. You're entitled to use anything at all.

One contract entitles you to use all existing services, and all new services as they appear — you do not have to contract again. That single pool of funds can be applied to anything you want to use. You can move your data from one data center to another without telling us. You can cancel a service without telling us and reapply that money to another service. You have complete flexibility in doing that.

The contract is incredibly simple. All you say is how much you're going to spend in a year, and dollar volumes determine your discount, and whether it's a monthly commitment or an annual commitment. We're done.

My take

This is a pivotal moment for Oracle, the point at which it truly begins to leverage all the economies of scale of the cloud model. Controlling and managing the entire stack has enabled a degree of automation and platform tuning that allows the vendor to deliver an unprecedented combination of performance, availability and operational efficiency.

That in turn allows Oracle to offer pricing deals that pass on some of its operational savings to customers, while incentivising them to commit upfront to its platform. Sophisticated operational automation also enables the vendor to be confident it can provision whatever services customers will ask for, without them having to specify in advance what they'll spend that money on.

All of this of course keeps customers from straying elsewhere while preserving and perhaps even improving Oracle's margins. If the level of automation really is as sophisticated as Ellison is implying, it's quite possible that Oracle is going to be making better margins from cloud services, even at lower prices, than it makes from traditional on-premise licensing. And lower prices often mean higher volumes, so revenues may continue to rise too, despite customers getting twice as much for their money in the Oracle Cloud as they currently get on-premise or at AWS.

Of course, these cost calculations only hold true so long as customers continue to use Oracle databases rather than open-source alternatives. But when comparing like with like, customers are going to be reassured that they'll continue to find value in sticking with Oracle as they move to the cloud.

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