Oracle Cloud@Customer – the Good, the Bad, and the Ugly

Oracle has had some version of their cloud@customer offering for a few years now. For those of you who may be unfamiliar with it, Oracle c@c is basically putting an Oracle Exadata machine in your datacenter, and having Oracle manage that server remotely. There are different sizes of machines, storage, networking, and management levels. The potential benefits of this solution are (according to Oracle):

  1. Your data doesn’t leave your data center.
  2. You reduce your overhead because Oracle manages the machine and database
  3. Oracle touts Exa machines as “engineered systems” with the hardware and software optimized to work together and giving you better performance.
  4. Lower costs. (This is not a joke!  Oracle says you will lower your costs, but the reality is your Oracle costs will increase and could easily skyrocket.)

Now the question is, what’s the real scoop with Oracle cloud@customer? Like I said, Oracle has been offering  this service for a while now and we have seen how our clients are reacting to the onslaught of Oracle sales pressure. So now is a good time to give our impression – the good, the bad, and the ugly.

The good – keep data inside the datacenter

The reason why we are writing this article now is because Oracle customers are finally interested in this cloud offering. After years of Oracle struggling, and hearing over and over from our clients that they had no intention of going down this path with Oracle, things seem to be changing a little bit. I’m not saying there’s an avalanche of interest in this offering. However, we have experienced a change in perception from “hell no”, to “show me what you’ve got”. That’s a great sign if you are Oracle. In fact, we’ve helped several clients negotiate new Oracle cloud@customer engagements, so we know it’s real.

Keeping data inside the datacenter seems to be the number one reason why our clients are looking at this solution. Either because of high security needs or because they are in regulated industries, keeping data within the four walls is very attractive to some companies. Also, having Oracle manage the servers and databases is also appealing as companies are trying to shed costs in these difficult economic times.

The bad – the business model

Oracle is basically leasing these machines to customers over a certain number of years. At the end of the lease you have to give the machine back and buy a new one or move to something else. In either case there is a data migration.

There does not appear to be an “option to buy” at the end of these leases. Oracle touts in its marketing that you get a new Exadata machine every few years! How can that be bad? Don’t you want new machines in your datacenter? The reality is, customers want machines that work and that are reliable and that last as long as possible.

We’ve had customers tell us they want to run these machines for 6 or 7 years before replacing them. Oracle cloud@customer requires an upgrade every 3 or 4 years.

While constantly refreshing sounds like a good idea (that’s why people lease cars, to get a new one every few years), replacing hardware like an Exadata machine is very costly, especially when there is really no business or technical reason to do it.

The ugly – ridiculously high price

We all know Oracle is expensive, but Oracle cloud@customer is off-the-charts-crazy-costly. It has both high direct costs and high indirect costs. It’s important to understand these costs so you can compare them to the potential savings of having Oracle-managed and engineered systems.

Direct costs

These are the fees you’ll find on your Oracle cloud@customer contracts. Leasing is supposed to be less expensive than buying, but not in this case. Not only are these leases more expensive, you also have to give them back.

If you buy an Exa machine, you keep it forever; if you lease an Exa machine in Oracle cloud@customer, you have to give it back in four years.

Buy = fewer costs and you keep forever.
Lease = Oracle cloud@customer costs more, and you don’t own it.

Again, there are potential cost savings to be had in other areas. Just don’t look for those savings in your contracts with Oracle. Are these Oracle costs worth it? That’s up to each individual company to decide.

Indirect costs

These are costs that are not specifically in your contract. Nonetheless, you should be aware of them.

I attended an Oracle sales session, and the Oracle rep continuously stated that you can consolidate licensing needs and reduce your licensing costs. I asked about Oracle support costs and whether you can lower them. (I know the answer to this question but really did want to hear what Oracle would say given that they were going on and on about lowering your costs.)

At first, they gave me the wrong answer, and said I could simply use fewer licenses and reduce the Oracle support costs. After I informed them they were wrong, they corrected themselves and agreed that you cannot reduce your Oracle support costs when using cloud@customer.

Unless you are decommissioning other hardware, using Oracle cloud@customer will increase your Oracle licensing costs.

The other indirect costs, and we touched on this above, are the costs associated at the end of your lease. Upgrading, replacing, migrating: whatever you decide to do will be something you’ll have to pay for.

Final thoughts – understand your contracts

While we cannot talk to the technical pros and cons of Oracle cloud@customer, we can tell you that a few of our clients are interested in this solution. That is a big departure from the general opinion of “no way” that has permeated our engagements for the last few years.

If you’re going to pursue Oracle cloud@customer, I highly recommend you understand what is in those contracts, and what is not in those contracts, and what Oracle will do to you when your lease is up.  I can tell you right now what they are going to do, get you to spend even more with them.  

Oracle is really pushing adoption of this offering, so you have plenty of leverage to get them moving off their standard contract language and onto something that is reasonable and meets your business needs. Everything is negotiable. Go negotiate!

And yes, Palisade Compliance can help you get the best Oracle cloud@customer deal!  We’ve negotiated over $1B USD Oracle contracts in the last few quarters.  We know what works and how to make sure you get the most from your Oracle investment.   Contact Palisade Compliance today for a free consultation.  

Craig Guarente
Craig Guarente
Craig is the President and Founder of Palisade Compliance, which he founded in 2011. Before 2011, Craig worked at Oracle for 16 years where he was the Global Vice President of Contracts, Business Practices, and Migrations. He was also the Global Process Owner for Oracle’s audit teams (LMS), a member of Oracle’s CIO advisory board, and on the Oracle User Group’s contract and licensing advisory board. Craig is now the leading expert on Oracle licensing, is quoted in dozens of publications, and assists with many high-profile Oracle disputes.