As public cloud vendors race to cut costs, Oracle does the opposite

Sometimes Oracle's predatory and price-gouging characterization is justified.

Tokyo Godfathers

I’m a big fan of action movies. In particular I like the Mafia-style genre which often has a big, aggressive antagonist playing tough over a weaker opponent. You know the storyline: Unsuspecting individual gets trapped into an ever-escalating situation where the odds just keep getting worse. Antagonist takes advantage of said individual to keep tightening the screws and making more and more difficult demands.

I was thinking about this sort of storyline the other day when I heard about some new licensing policies that Oracle -- the technology industry's best analog for Al Capone -- had announced. Specifically, the licensing applies to those Oracle customers running databases on Amazon Web Services (AWS) or Microsoft Azure.

The subtext for the new approach was, of course, the fact that AWS and Microsoft are generally considered the two largest and most important public cloud vendors out there.

I say "generally" because Oracle is adamant that it in fact is the biggest cloud vendor out there. This assertion is one of a host made by Oracle founder Larry Ellison who, in his best Trump-esque style, suggested that Amazon is slower than Oracle, that its tech is out of date, and that it is "more closed than an IBM mainframe." Lovely.

So one would have thought that, since Oracle is so sure of the superiority of its own cloud offering, it would simply let the market flock to it in waves ready to lap it up, and that no strong-arm approaches would be required to attract customers.

Not so, it would seem.

You see, the latest licensing approach is a technical piece of legalese, but the upshot of it is that for many customers bringing Oracle licensing onto AWS or Azure infrastructure, the licensing cost will significantly grow – in some cases to double what it was previously. Essentially, Oracle raised prices for its customers and created a disincentive to move to AWS or Azure.

And this isn't a standalone occurrence -- it has happened before, and Oracle seems to love using complex and confusing licensing policies as a tool to keep customers and get them to pay them more cash. Which, unless you'd seen the history, would come across as surprising. Oracle's story is all about its commitment to cloud and having the "cheapest" cloud option.

But what is going on behind the scenes shows that the company is really still fighting a growing customer trend. 

The real issue here for Oracle is that these predatory and obnoxious moves do nothing to build the credibility or market perception of its own cloud offerings. It's hard not to make the assessment that, in the absence of innovation and customer-centric progress, the company resorts to commercial and legal levers to keep its revenue stream.

Of course, these moves may have unintended consequences, as Jim Mlodgenski, CTO with database consulting firm OpenSCG, points out.

"Oracle's move here may backfire and have the opposite effect by giving customers a reason -- and a sense of urgency -- to accelerate their migration plans," he said. "Customers have viable alternatives to Oracle and database migrations aren't the impossible task they once were. PostgreSQL is a mature, enterprise-grade option without the huge license fees and annual maintenance plans (used by companies like GE and Morgan Stanley).

"Since Oracle's license policy announcement, we've seen an increase in customers interested in moving off of Oracle to other options like PostgreSQL and Aurora," he continued. "We have done many migrations for customers from Oracle, including more involved projects with large stored procedures and business logic in the database or SQL and C-api calls embedded throughout the application code. In many cases, customers see their payback -- from Oracle licenses savings alone -- in six to 12 months, and always it's less than two years."

Meanwhile, customers vote with their checkbooks or requisition forms. In 2016 alone, 16,000 customers used AWS's Database Migration Service, and many of those came from Oracle -- it seems like the stunts that Ellison is pulling on his customers aren't working as well as he'd wish.

Someone needs to come up with a script and sell it to Hollywood. Life certainly imitates art, and Ellison really is a modern day Godfather. A technological genius -- but one who "knows people."


Copyright © 2017 IDG Communications, Inc.

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