The hard truth of metered license pricing in the cloud

Oracle on Amazon RDS sheds light on the kinds of premiums IT should expect to pay for per-use licensing flexibility in the cloud

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The Oracle list price for Database SE1 is $5,800 plus 22 percent, or $1,276, for software update, support, and maintenance. As with most enterprise software, customers could expect a discount of between 25 to 85 percent. For lower-priced software like Oracle Database SE1, let's assume a 50 percent discount, although most Oracle customers are encouraged to enter into Unlimited License Agreements (ULAs), which frequently offer discounts at the higher end of the spectrum.

All told, Oracle Database SE1 after a 50 percent discount would cost a customer $3,538 [($5,800 + $1,276) x 50 percent] for one year, or $4,814 [($5,800 + $1,276 + $1,276 + $1,276) x 50 percent] for three years on a single-socket quad-core machine, such as a low-end Dell server. Note that Oracle doesn't use its typical processor core factor pricing methodology for products identified as SE or SE1 as they are targeted at lower-performance servers.

A single-socket quad-core machine would offer the performance of somewhere between the Amazon Double Extra Large DB Instance and the Quadruple Extra Large DB Instance in the table above.

Consider the long-term costs of pay-per-usage

Using Double Extra Large DB Instance pricing, with our calculated cost of an Oracle Database SE1 software license on Amazon of 40 cents per hour, we reach a one-year cost of $3,504 and a three-year cost of $10,512. These figures represent a mixed bag. The single-year total is 1 percent lower when comparing Amazon's pay-per-usage offering versus licensing Oracle Database SE1 through Oracle for on-premises deployment or a BYOL deployment on Amazon RDS, but 118 percent higher for the longer run. Obviously, there are also multiple caveats to consider, like the ability to get lower or higher discounts from Oracle or comparing calculations against the Quadruple Extra Large DB Instance price point.

A customer that is unable to get a 50 percent discount from Oracle could save licensing costs by using Amazon's pay-per-usage offering for Oracle Database SE1. For instance, with only a 25 percent discount from Oracle, the customer could save up to 34 percent within a year, but still stands to pay an extra 46 percent over the course of three years.

Comparing the cost of Oracle Database SE1 using traditional licensing on premises with Amazon's pricing through RDS, it appears that customers should look hard at Amazon's pay-per-usage offering for up to a one-year term, but stick with Oracle's traditional pricing model if the software is going to be used for the typical three- to five-year period over which companies traditionally amortize costs.

The obvious rebuttal to the above calculations would be that a customer electing for a pay-per-usage model would not necessarily run for 24 hours a day for a full year. While this is true, buyers should understand the long-term cost implications before making short-term decisions.

Follow me on Twitter at SavioRodrigues. I should state: "The postings on this site are my own and don't necessarily represent IBM's positions, strategies, or opinions."

This article, "The hard truth of metered license pricing in the cloud," was originally published at InfoWorld.com. Read more of Savio Rodrigues's Open Sources blog and follow the latest developments in open source at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

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