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Is Oracle’s “Discount Rate” like “Property Tax Rate”?
The conversation of Oracle Licensing routinely pops up every once in a while and sometimes you have to make it interesting by using an analogy. So here it goes…
To tell the story a very different way: when the housing market tanked not long ago many home owners took the opportunity to dispute the value of their home with property tax board. As a result many home owners saw their property taxes declined however the local governments’ revenue declined too. So in the following year(s) homeowners saw the ‘property tax rate’ increase which unfortunately cannot be disputed with the property tax board.
Replace ‘property tax rate’ with ‘discount rate’ and you see Oracle has the means to maintain revenue. So hopefully you can get the idea of how this conversation started. Using virtualization for consolidation a customer can decrease the number of CPUs / core count with the idea of saving on Oracle licensing. However Oracle can adjust the discount rate the customer receives to ensure revenue doesn’t decline. Apparently better management via consolidation may not lead to savings from Oracle! So what has been your experience?
jeff_browning
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November 5th, 2013 15:00
I have heard this as well. I had dinner with a group of senior DBAs from GE, and was taken severely to task for my vaunted "you're going to save huge $$$ by virtualizing your Oracle database servers" diatribe, which I have consistently delivered since VMworld 2008. No longer. Now I am a bit more realistic.
The GE folks had the experience that when their core count declined, their discount declined. Yes, that is identical to the property tax board. In both cases, someone else has control of one number, and you have control of another number. The amount you pay is tied to both numbers. As long as you can only turn one knob, you do not have control over your Oracle costs. They do.
However, there is one solution. In the book Dune, Frank Herbert wrote:
"He who has the power to destroy a thing, controls that thing."
Thus, it is the power to destroy the thing (in this case the customer's relationship with Oracle) that is important. Oracle has an obvious reason to maintain that relationship (an income stream). More and more, though, the customer may not have the matching reason. There is a lot of evidence around that Oracle is losing ground in the database space. I would be so bold as to say that the existence of as vibrant and competitive an open source database or database-like software market as we have right now (e.g. DataStax, NoSQL) is largely about the customer being dissatisfied with the Oracle relationship.
I am picking my words carefully here, but I would say in my personal opinion, Oracle adjusting the discount rate for a virtualization customer is a very poor business decision on their part. I mean, unless I am missing something, the customer is doing something good here. Virtualization saves massive carbon footprint after all. It's kind of like Oracle is giving the less responsible customer a better deal. Wasting CPU is fine with Oracle: They give you higher discount for that!
I tell your tax board something very similar: You are going to drive away hard working people who just lost much of their wealth if you punish them by raising their taxes. They will take their hard earned tax dollars somewhere else, thank you very much. You should tighten your belt instead. Times are lean for your taxpayers. Times better be lean for you too.
Maybe I am an idealist, though.