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How do Oracle on-premises and Oracle cloud licensing differ?

Software licensing expert Keith Dobbs explains how Oracle's cloud focus has affected its licensing policies -- and how Oracle Cloud at Customer could change things for on-premises users.

Let's first look at how the cloud has affected the way Oracle handles software licensing. As well as investing...

heavily in development of its own public cloud, Oracle has struck up relationships with approved cloud partners. They include Amazon Web Services through its Amazon Relational Database Service and Elastic Compute Cloud offerings and Microsoft via its Azure cloud platform. Oracle has instituted special licensing terms for users of its software on both the AWS and Azure platforms, in addition to Oracle Cloud customers. In each case, the cost of an Oracle cloud license is based on a virtual equivalent of physical processor cores.

However, the standard Oracle cloud licensing terms don't cover software hosting, one of the fundamental elements of cloud computing. Prior to October 2012, if negotiated at the time of purchase, Oracle did permit generic hosting, which allowed a company to deploy Oracle-based servers that could be made available for use by third parties. That sounds like a good basis for building a cloud architecture -- so when it removed the right, Oracle was taking back control of the hosting world in preparation for an expanded push into the cloud itself. The company did so by preventing nonapproved vendors from setting up platform-as-a-service (PaaS) cloud hosting in competition with Oracle.

The only form of hosting currently allowed under the Oracle licensing rules is proprietary application hosting for independent software vendors that are adding value to Oracle software. This means companies that provide software-as-a-service applications on the back of Oracle technology.

One of the ways Oracle is trying to tempt people into its cloud is a part of the proposed resolution of noncompliance findings that result from reviews of software installations by its license management services unit. Oracle often offers cloud credits in lieu of pushing customers to purchase on-premises licenses that they may not need in the future.

As far as conventional on-premises server environments go, there have been no significant changes to Oracle's licensing policy. The company's technology is still licensed primarily by processor, via a counting of either CPU sockets or cores.

However, there's a big change in process following the launch of the Oracle Cloud at Customer service, which was announced at CloudWorld in Washington in March 2016. The service provides the full set of Oracle Cloud infrastructure-as-a-service and PaaS offerings for deployment on-premises, using identical code and identical setup and management as in the cloud.

Based on a standard Oracle hardware configuration and incorporating Oracle Enterprise Manager's hybrid cloud management capabilities, Oracle Cloud at Customer is intended to ensure consistency between systems in the Oracle cloud and on-premises environments. This transparency also aids deployment and makes possible, for example, overspilling workloads into the cloud when an on-premises system is saturated.

Detailed pricing information is hard to find, but the announcement mentioned a three-year-minimum subscription period and elastic metered pricing. I assume that the three-year subscription covers the hardware rental and the metered pricing covers the software. It's possible to scale software instances up and down under an Oracle cloud licensing agreement, and that should also apply on-premises.

That would be a step in the right direction, away from the constant ratcheting up of software costs that we know today. It's still early days, and we only have a high-end offering at present, but I hope it’s a precursor to more user-friendly Oracle licensing.

Keith Dobbs is a co-founder and director of Madora Consulting, a U.K.-based company that specializes in helping Oracle users through the complexities of Oracle licensing. 

Next Steps

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This was last published in June 2016

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