What does Oracle’s new universal credit model mean to users?
With the announcement of the new “universal credits” model, Oracle aims to strengthen its position in the cloud market and break through Amazon’s hegemony. Does the software vendor succeed? And what should you pay attention to as an Oracle customer?
Although Oracle’s cloud sales are clearly increasing, the actual use of sold PaaS and IaaS products is lagging behind – especially in comparison to Amazon. On the one hand, this due to Oracle account managers using financial incentives – huge discounts, audits – to get customers into the cloud. Customers therefore sign a deal because it is financially attractive (for their on premises licenses), not because they need it professionally or already want to start using it. On the other hand, Amazon has been offering IaaS and PaaS services for over ten years, so why should you choose Oracle, that only recently started to focus on cloud? In addition, many companies don’t necessarily have a good experience with Oracle on a contractual level.
Oracle is trying to break Amazon’s dominant position in multiple ways. That started earlier this year by making the use of Oracle Database and Middleware software programs through the Amazon Cloud more expensive. Now the universal credit model is introduced. Oracle’s first cloud contracts had the same inflexibility as the old on premises licenses contracts, but with this new model, Oracle gives its customers much more freedom.
Cash in on installed base
This way, Oracle certainly makes its cloud services more interesting for companies. But that does not mean that you have to accept just any cloud offer. No matter how financially attractive a deal seems to be, first, make sure your organization really needs it. And even if the added value is evident, it’s important to realize that Oracle has only one interest: getting as many businesses in the cloud as possible, as quickly as possible. The deal might be financially attractive now, but what guarantees are there that it will remain the same in three years?
Oracle is likely to increase the prices over years. It would be a repetition of Oracle’s approach in the early 80’s: first, it conquered a lot of market share with huge discounts, then conditions were adjusted (and prices were raised) to make more profit. Cashing in on installed base is a tactic used by many software vendors, in the cloud as well. Adobe initially offered its Creative Suites quite inexpensive in the cloud, but in the meantime, prices have been greatly adjusted upwards.
Spread your risks
You can overcome this by preventing being completely dependent on one software vendor. If you have all key applications, databases and hardware in the cloud with Oracle, there will be a vendor lock-in. This eliminates your negotiating position and Oracle can basically ask for any price they want. Spread your risks across multiple vendors. If you’re already in the process of switching to the cloud with its significant changes, this is the perfect moment to think about it. An additional advantage is that you can choose the best products from different vendors so the overall quality of your IT increases.
This article is also published on computable.nl (Dutch).
Richard is one of the managing partners at B-lay. He started to work in the license management industry in 2004 and worked for almost 10 years at Oracle as regional director of compliance. He uses his knowledge of enterprise software vendors (such as Oracle, SAP, IBM and Microsoft) to educate, equip and enable software end users in their challenges regarding proper software license management. Richard holds a master’s degree in IT, from University of Amsterdam in the Netherlands.