Oracle tempts users to run its cloud in their own data centres – for a mere '$6 million' commitment

Updated Oracle's new on-premises cloud product has prompted concern among commentators, who've said it requires a strong financial commitment and could shift customers to higher cost deals.

Big Red is now selling an on-prem set-up of its Oracle Dedicated Region Cloud, completely managed by the company itself, using the same architecture, cloud services, APIs, and SLAs as its equivalent regional public and private clouds.

Regis Louis, exec veep of product management for Oracle Cloud Platform in EMEA, said: "Customers can think of it as their own private cloud running inside their data centre, or they will also see it as a hybrid cloud, given that this the exact same thing we offer in a public cloud.

"They've got the flexibility of deploying their workloads on the public cloud, or on this 'at customer' environment. It is extremely seamless given you're using the exact same services, and the exact same architecture."

Oracle has also made public its Exadata Autonomous Database on Cloud@Customer. The Autonomous Database, which promises self-patching, self-optimising behaviour, was previously only available on Oracle's cloud, and while Exadata scale systems were available on-prem as part of a service package, they were not on an in-house cloud.

Oracle's new on-prem cloud schemes are only available under subscription licensing. Any current perpetual licences for applications or databases must move to the subscription model to take advantage of them, even though they might be running in the same data centre.

Cloudy costs

Prices for the Oracle Dedicated Region Cloud@Customer start at $500,000 per month. One source told The Register that Oracle was looking for at least a $6m commitment before it would shift customers to the new model.

Other commentators said they were concerned that the switch could drive up costs for customers in the long term.

Craig Guarente, founder of licensing advisory firm Palisade Compliance and former Oracle veep for contracts and business practices, said users should understand that Oracle has a $20bn support business on which it makes roughly 95 per cent margins. While customers might be looking to reduce costs in moving to the cloud, Oracle's margins in the cloud were around 60 per cent, at least according to his own estimations.

"For Oracle to make the same dollar in the cloud as it does on-premises, it might have to double cost. Customers don't want to use Oracle [for a cloud infrastructure]... It is too expensive," he opined.

Underlining the caveat that his clients contacted his firm only when they were generally trying to solve licensing issue around their relationship with Oracle, he added: "We've never had a client come to us wanting to use Oracle for cloud infrastructure. They feel they are being forced to use Oracle, but they want to use AWS, Azure, and Google - even IBM. Having said that, I'm sure there are happy, loyal Oracle customers out there."

Oracle sells a "bring-your-own licence" scheme when shifting customers from on-prem applications and data.

When pressed on whether the transition could incur an Oracle audit on existing perpetual licences, Oracle's Louis said: "That's all based on trust. This is the way we've worked: that customers are declaring they have a licence for [the software]."

Raj Bala, Gartner research director, said demand for on-premises cloud from Oracle had not been strong, but a comparable service from AWS called OutPosts was stimulating interest.

Based on Oracle Cloud Infrastructure, the "reboot of their cloud offering," customers would get the same quality of engineering, Bala said, adding: "It is pretty well-architected."

But given the scale of the commercial commitment to Oracle, customers would be wise not to transfer meagre workloads. "You cannot start small. With this, you really have to go all-in and make a commitment," he said.

It would probably only appeal to those with large existing workloads on Big Red. "This is mostly for Oracle applications and workloads. I doubt there'll be newly engineered workloads that will be using this on-premise cloud," Bala said.

Updated on 9 July @ 12.58BST to add:

Oracle made contact following publication of the article with responses to our questions.

"Oracle Dedicated Region Cloud@Customer requires a minimum commitment of $6M/year in consumption over a three-year period. In exchange for a consumption-based commitment, you get the flexibility to select the exact amount and type of compute/storage that you need for workloads without getting locked into a specific configuration. If your workload needs change during the length of the term, Oracle will manage any hardware exchange at no additional cost. You will only be responsible for truing up the commitment made when you ordered the region." ®