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Oracle’s Cloud Purchase Programs – The Good, the Bad, and the Ugly

Oracle is not faring well with sales of Oracle Cloud products. With the aim of converting its massive customer base from on-premises solutions to the cloud, Oracle has developed incentives and purchasing programs to accelerate Oracle cloud adoption.

Compared to the growth rates of AWS and Azure, 46% and ~76% respectively as of their last quarter, Oracle’s much slower growth rates (estimated between 20-47% across select SaaS products) and on the back of a much smaller revenue base should be a red flag for would be Oracle customers.

This was most recently evidenced by Oracle’s cessation of breaking out cloud-specific performance and sales/growth numbers in Q4 of its FY18. Since then and as of its last Q3 FY19 earnings report, it only has an overall 3% revenue growth. While claiming that cloud sales are still powering forward, the only range provided for growth is between 20-47% depending on the SaaS product in question, but without Oracle reporting the actual numbers, who really knows?

The SaaS focus also diverts from what is surely a soft IaaS and PaaS business environment for Oracle. By comparison, AWS growth rates were recently pegged at ~46% as of its last financial reporting period; this is big growth from a big base ($~26B) of revenue vs. Oracle’s rather paltry growth off of a small revenue base (maybe ~$5-6B).

Oracle’s Cloud Purchasing Program

Here come the carrots from Oracle! Oracle is keenly focused on migrating its 400k customer base from on-premises solutions to the Oracle Cloud solutions and has devised some incentives and cloud-only products (e.g. Oracle Autonomous Database – 18c) to stoke customer demand.

Oracle customers can purchase IaaS and PaaS services under two purchase programs.

Universal Cloud Credits

  • Flexible buying and consumption program for IaaS and PaaS services only.
  • Purchase via pay as you go (PAYG), billed in arrears or via Monthly Flex.

The Monthly Flex program is Oracle’s preferred pathway for customers to onboard to the cloud as it requires customers to predict usage of products and volumes for each month.The pitfall is that customers must commit (one year minimum) to a monthly spend minimum per month with no rollover option for unused credits.

The primary incentive Oracle is offering for customers to commit to the Monthly Flex program is a higher discount percentage off of rack rates vs. the PAYG model. There is built in flexibility to use the credits for any of Oracle’s IaaS and PaaS services. Starting minimums are $1,000/month with discounting starting at $5,000/month minimum commitment levels.

The PAYG program is really not meant to be used indefinitely by customers. Its best fit is for prototype and initial trialing of various cloud services. The PAYG option is more expensive (e.g. less discounts) than Monthly Flex.

Bring Your Own License (BYOL)

  • Allows customers to use their on-premises licenses on Oracle IaaS and PaaS services; no SaaS services.

The BYOL program seeks to minimize the cost of migrating to the cloud by allowing the continued use of your existing (and paid for) perpetual licenses in the Oracle Cloud. The BYOL program can be used for both Oracle’s Public Cloud and Oracle Cloud at Customer (on-premises private cloud). This will allow you to only pay the costs for IaaS compute, support, and automation capacity in addition to the ongoing support fees for the perpetual licenses.

Recommendations

  1. Note that Oracle’s Ordering Documents for IaaS and PaaS services are byzantine and ambiguous. It is critical for Oracle customers considering the adoption of Oracle Cloud to demand price, capacity, and consumption transparency from Oracle, along with a breakdown of pricing tiers by service line.
  2. Accurate usage predictions are essential under Monthly Flex to ensure you are not overbuying capacity that will not be used during the month.
  3. Beware the “flex” option to use credits for any IaaS/PaaS service. Oracle’s goal is to have customers deploy unused credits into new cloud services, thus expanding your Oracle Cloud footprint and driving up spend.

Want to Know More?

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