Michael Welsh

Mar. 20,2017

Oracle has doubled down – literally – in their ploy to shore up declining revenue in its traditional licensing model.  Filed under ‘in case you missed it’, Oracle starting in January literally doubled the cost of running its software in the AWS cloud.  Here is a basic summary: Previously each one vCPU was equivalent to .5 Oracle Processor License or two vCPU required a Processor license….but now:

• AWS EC2 and RDS - one vCPU as equivalent to one Oracle Processor license if hyper-threading is not enabled

The same increase applies to Microsoft with:

• Microsoft Azure – one Azure CPU Core as equivalent to one Oracle Processor license

The net of it is, that Oracle has just doubled the price to run its database in any non-Oracle cloud.  Oracle has not been able to provide a competitive cloud offering to the marketplace so it appears to have decided to do what it can to make other’s cloud offerings more expensive at least as it relates to running Oracle’s software on them.

Oracle watchers may remember a similar price change based upon date rather than any technical basis.  Back in 2010, Oracle decided to force customers running the HP Itanium chipset to pay a premium by doubling the chip core factor from .5 to 1, which in effect doubled the price.  The end result was to basically sound the death knell (or at least hasten it) for Itanium.

There is a famous quote that says, “Those who fail to learn history are doomed to repeat it.”  The world of software is no different.  Oracle certainly is looking to its own history.  If you could wield anti-competitive practices to drive customer behavior in your favor, why not do it again?  Oracle has decided that they can’t cost compete with AWS, Azure, Google and others, so they are using the only leverage they have available to them to diminish the competitive advantages enjoyed by non-Oracle cloud providers.  Just one more example of Oracle trying to protect declining revenues.

Another sleight of hand Oracle has mastered, is the art of what we call, ‘Charging by Omission’.  If you are working under an Oracle ULA that does not specifically outline a provision for cloud certification, they are using that to leverage (force) customers to then purchase PaaS (Platform as a Service) which is crazy expensive even compared to Oracle’s own pricey cloud offering.

You really can’t blame Oracle however, as it’s really a win-win scenario (at least in the short term).  If any customer goes to Amazon cloud, they will now have to pay double to Oracle.  If customers are dissuaded from going to Amazon or alternative provider’s cloud – they migrate to Oracle cloud where they can keep the revenue and add to their lagging cloud business.  Either option is a revenue win for Oracle and Wall Street – for now.  Sometimes in Blackjack ‘doubling down’ pays off…big.  But how many times can you double down before you bust...or get busted?

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