Oracle Cloud: Universal Credits. What you need to know…

In September 2017, Oracle announced a change to their Cloud pricing and transaction model for end users and partners alike. The change was born out of poor customer experience with contracts and billing on their previous model along with frequent internal challenges to provide a streamlined “wash, rinse, repeat” billing and payment mechanism for consuming cloud services.

Previously, customers (and partners) were expected to size individual Cloud Services according to predicted usage and timeline. There were two choices;

Metered – Ideal for environments that might scale up and down or be switched on/off over time.
Non-Metered (Subscription) – Ideal for predictable and static services that can run and run.

Metered was very popular because customers could start small and the Cloud Credits would last for 12 months. If you didn’t use them for 4 months; no matter – you still had 8 months to use them. If you used them ALL in 4 months you could replenish the credits and continue using the cloud services.

One notable challenge with Metered Cloud Credits was that a customer (and Partner(s)) had to engage with Oracle each and every time there was a replenishment needed and/or a new transaction for a new Cloud Service. It was an admin heavy and cumbersome process that relied on Oracle having the processes to cater for the supposedly simple panacea of “wash, rinse, repeat” – order Cloud Services, quickly, have the environment available in <24 hours and be able to replenishment credits as easily.

Another challenge with Cloud Credits was the lack of “Bring Your Own Licence” to Platform Services such as Database Cloud Service. BYOL was available on IaaS but customers who wanted to benefit from all the platform features that PaaS offers there was no way to “bring” their on-premise software licenses to lower the cost of cloud adoption further. The message from Oracle was clear: throw away your software licenses and start again in the Oracle Cloud. Clearly this was a bad move and went down like a lead balloon.

The Good: Cloud Credits could be consumed at a rate dictated by the customer.
The Bad: Customer had to transact multiple contracts with Oracle if using multiple Cloud services & No BYOL to PaaS.
The Ugly: consistently poor customer experience highlighted the vast chasm between Oracle and AWS for easy and rapid cloud bookings and provisioning.

A change was needed and a change we got.

In September 2017 Larry Ellison announced just before OpenWorld that Metered and Non-Metered Cloud Subscriptions were being phased and out to be replaced with Universal Credits. The ability to “Bring Your Own License” to PaaS was also announced.

Larry proceeded to announce to the world that Universal Credits was the answer to the simplicity that customers were crying out for but an additional and very surprising bonus feature was also announced – Oracle were SLASHING the price of Cloud Services significantly! In some cases up to 70%! The cost of Cloud adoption was soon to come down to levels where Oracle would beat AWS and Azure in a fair fight comparing CPU to CPU and TB to TB, and most importantly; without discounting.

As an Oracle Partner we loved what we were hearing from Larry! Here’s a short clip of the announcement from September 2017:

Larry continued: Universal Credits would be a unit of Credit that could be used to consume any CURRENT and FUTURE Cloud service regardless of whether it is PaaS or IaaS! So not only was Oracle cutting the cost of Cloud but it was also making the transaction and contracting process much simpler. All you need to do is size what you expect to use or want to use and pay for that amount of credits; it could be £10,000 or £100,000 or even £1m!

Not only that; Oracle were adding TWO billing choices;

Monthly – Get a greater discount from Oracle based on committing to a monthly spend over the contract. Use it or lose it on a monthly basis.
Annual – Get a smaller discount from Oracle based on committing to an annual spend. Use it or lose it on an annual basis.

The Universal Credits Annual model was very similar to the previous Metered Cloud Credits model; spend your credits over the course of a 12 month period. So especially useful for non-production environments or production environments with spikey workloads.

The monthly model is designed for production or stable workloads where the service can be started (and be consumed) in month 1 and it runs for the length of the contract without changing. This model works on the basis of (assuming a 1 year contract) splitting the total amount of credits into 12ths for every month of the year. For example, £12,000 means that you are committing to spend £1,000 per month on Oracle Cloud Services. What happens if you spend £800? Does the spare £200 roll over to month 2? No, you lose it. So what happens if you spend £1,200 in a month? You go into “overage” (read overdraft) and get billed directly from Oracle. The overage charge is the lower of 150% of the discounted rate card price or PAYG list price (which ever is lower). So certainly something to avoid  – it’s clearly going to be a challenge to budget for and reconcile within the business.

Never mind we thought – “the annual model works for most customers so we’ll focus on that…wait…what do you mean Oracle have pulled the Annual Universal Credits option only 3 weeks after launching it?” – me. Sept 2017. My Desk.

Yep, you read correctly. There is just one option now when it comes Universal Credits and Oracle call it Monthly Flex.

It’s not all bad news – far from it. The new Universal Credits model is a good move by Oracle and step in the right direction. There are just more steps to take.

The ability to Bring Your Own License to PaaS is another welcome addition. Many customers want the ability to use their Software assets against Cloud deployments – especially against Platform services such as Database Cloud Service. This is to benefit from the rapid provisioning, automation and tooling that comes with PaaS. Now the cost of these PaaS services is, again, significantly cut due to big chunk of this cost coming from, essentially, the license. If you already own the license it’s a great move by Oracle to give you access to PaaS and a cut down cost. The only observation to make here is that you, the customer, are still liable for license compliance so watch out! If Oracle know you are doing this, expect License Management Service (LMS) to be keeping a close eye on you.

So how do I summarise all of this…

The Good…

Simplicity – you don’t have to contract multiple times for different cloud services
Low Cost – Oracle has significantly reduced the cost of UC to be more competitive
Wash, Rinse, Repeat – Oracle has improved, and is still improving, processes to make transacting as simple as possible with fast provisioning times (<24 hours)
BYOL to PaaS – The cost of Universal Credits comes down even further when you “Bring Your Own License” to PaaS
UK Datacentre – UK customers can now choose UK Datacentre(s) as standard at time of booking. This is previously only restricted to “BIG” customers and order values

The Bad…

No Annual model – the annual payment model was the real game changer for Oracle and would have allowed customers with non-production, or un-predictable/”spiky” production workloads to move to the Oracle Cloud without hesitation. You just don’t have any flexibility to agility with Monthly Flex, which is exactly what Public Cloud is meant to be about, right?

The Ugly…

PAYG Overage charges – if you spend more than your contracted amount per month you will be billed (invoiced by Oracle directly) at list price (~30% more than monthly flex). This obviously erodes some of the value of Universal Credits and introduces un-budgeted expense to the business with a complex paper trail. Messy.
Too much waste – if you over-compensate for the point above you will go as far as under-spending per month. This leads to waste and again erodes some of the value of what Universal Credits was meant to be giving you; lowering costs and simplifying cloud.

“But Jon, even if the customer gets billed for overage or under-spends in another month there are still great cost savings over the previously metered model”

Maybe, but this will depend on the frequency that a customer under-spends/over-spends. Regardless, it’s not really the point. Universal Credits was meant to be about simplicity and flexibility. Monthly Flex does not give you this unless you have a static and predictable cloud workload.

So what next?

If you are investigating Oracle Cloud my advice is that you need to do so with experienced Cloud Service Providers to size your environments and workloads correctly, from day one. Ask for references. Ask for evidence of experience in real world implementations of Cloud and speak to the people who have actually done it. An Oracle Cloud Success Manager (CSM) does not do implementations. They are a valuable resource to assist partners and end users with back office or technical issues and a useful link to My Oracle Support, but don’t let yourself be convinced by anyone that they are the difference between a failed and successful cloud implementation. Cloud Success comes from working with the right partners; from day one.

Author: Jon Lingard

Job Title: Practice Director

Bio: Jon is a member of the Oracle sales team and works with customers from start-ups, SMEs to large corporations to gain maximum value from their investment in Oracle technology. Jon works with the technical and development teams to shape solutions based on customer demands and develops long lasting customer relationships based on his open and trustworthy approach.