May 2011

Established software vendors face a difficult balancing act between meeting customer demands for pay-per-usage cloud pricing models while guarding against revenue erosion on traditionally priced offerings. If Amazon’s price for Oracle Database on RDS becomes the norm for price discrimination between traditional and per-per-usage licenses, IT buyers could find themselves paying over a 100 percent premium for the flexibility of pay-per-usage pricing.

Note, I am only using Oracle as an example here because the pricing of Amazon RDS for Oracle Database is public. This post intends to make no judgments on Amazon or Oracle’s price points whatsoever.

Pay-per-use software pricing limited to entry level product
Amazon RDS for Oracle Database offers two price models, “License Included” or “Bring Your Own License (BYOL)”. The License Included metric is fancy terminology for pay-per-usage, and includes the cost of the software, including Oracle Database, underlying hardware resources and Amazon RDS management.

Three editions of Oracle Database are offered by Amazon, Standard Edition One (SE1), Standard Edition (SE) and Enterprise Edition (EE), listed in order of lowest to highest functionality.

It’s important to note that pay-per-use pricing is only offered on the lowest function edition, namely, Oracle Database SE1. This should not be a surprise as Oracle, like other established vendors, is still experimenting with pay-per-usage pricing models. Customers can also run Standard Edition One using a BYOL model. This fact, along with Oracle’s list pricing, helps us do some quick and interesting calculations.

Oracle Database SE1 software price-per-hour ranges between $0.05 to $0.80
The License Included and BYOL prices both include the cost of the underlying hardware resources, OS and Amazon RDS management. The only difference between the two options is the price of the Oracle Database software license.

This allows us to calculate the per hour cost of Oracle Database Standard Edition One as follows:

The Oracle list price for Oracle Database SE1 is $5,800 plus 22 percent, or $1,276 for software update, support and maintenance. Like most enterprise software, customers could expect a discount between 25 to 85 percent. For lower priced software like Oracle Database SE1, let’s assume a 50 percent discount. Although, most customers buying Oracle software 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%) for 1 year or $4,814 ($5,800 + $1,276 + $1,276 + $1,276) x 50%) for 3 years on a single socket quad core machine like this low end Dell server. Note that Oracle doesn’t use their typical processor core factor pricing methodology for products identified as Standard Edition or Standard Edition One 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”.

Consider the long term costs of per-per-usage
Using “Double Extra Large DB Instance” pricing, with our calculated cost an Oracle Database SE1 software license on Amazon of $0.40/hr, we can calculate a 1 year cost of $3,504 and a 3 year cost of $10,512. These figures represent a 1 percent lower and 118 % higher cost of using Amazon’s per-per-usage offering versus licensing Oracle Database SE1 through Oracle for on premises deployment or a BYOL for deployment on Amazon RDS.

There are obviously multiple caveats to consider, like the ability to get lower or higher discounts from Oracle, or comparing with 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 on a 1 year basis, but stands to pay an extra 46 percent a 3 year basis.

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 per-per-usage offering for up to a 1 year term, but stick with Oracle’s traditional pricing model if the software is going to be used for the typical 3 to 5 year period that companies like to amortize costs over.

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.”

Reaction to Google’s Chrome book announcement at has ranged from wildly positive to, shall we say, less than positive. To naysayers, I’m reminded of Clayton Christensen writing on sustaining vs. disruptive innovation. Chromebook is a disruptive innovation, and will play a growing role in tomorrow’s IT department. I’ve said it before, and I’ll repeat it now – plan ahead to use ChromeOS/Chromebooks in your enterprise.

ZDNet’s Ed Bott isn’t sold on the value or success potential of Chromebooks. He came up with five reasons why Chromebook isn’t a Windows killer. I’d like to respond to Bott’s five points.

1. Google’s pricing strategy a step towards IT as a service
Bott feels that the price is too high “for a glorified netbook”. However, Bott is focusing on the acquisition cost, not the total cost of ownership.

Back in 2008, Gartner estimated the total cost of a $1,500 notebook over a 4 year period could range between $5,033 and $9,900. The ongoing cost far outweighed the initial cost by between 236 percent and 560% percent.

Google bundles the hardware, OS, maintenance and some administration cost into that $28 per user per month. Companies can opt to pay $50 per user per year separately for Google Apps, an alternative to Microsoft Office and Microsoft Exchange. On a monthly basis, these two prices net out to under $35 per user per month.

Another point to consider is that the monthly fee, versus an upfront hardware cost, allows companies to plan their IT budgets more effectively. Some may see the pricing as allowing companies to move capex dollars into opex dollars.

2. Automatic updates don’t have to be a nightmare
Google claims that automatic updates enable a continuously improving system. However, Bott feels that pushing updates to users can sometimes break things, calling them a nightmare.

The key difference between Chromebooks versus Windows PCs or Macs is there is only an operating system to update on the machine.

Google and other providers of apps for Chrome can update their applications on their servers and not have to push out the changed application. Users connect to the web and always use the most current version of the application.

3. All apps that some users need can run in a browser
Bott rightly calls into question whether a Chromebook is appropriate for everyone in your enterprise. A Chromebook isn’t going to be useful for your programmers or graphic designers, as Bott calls out, but could your knowledge workers, or some portion of them, use a Chromebook? Absolutely.

Bott also calls into question the value of using a desktop virtualization technology, like Citrix, to provide access to native applications that a Chromebook can’t support. However, the ability to use Citrix reads to me like a simple way for Google to deflect FAQ questions versus something that a typical Chromebook adopter would do.

4. Universal connectivity and off-line access is not a pipe dream
Bott asks: “Do you really want to bet the productivity of your entire workforce on having reliable, fast Internet access everywhere?”

Most knowledge workers spend considerable time at the office, coffee shops or home, all places where an internet connection is readily available.

Additionally, Google had already announced that off-line access to GoogleApps is forthcoming. It’s only a matter of time before other web applications use local storage to offer off-line functionality.

Bott also mentions the issue of a user needing access to documents stored on a server somewhere, when they are unable to find an internet connection. Apps such as Dropbox for Chrome OS, or the ability to store, say the last 50 documents used within Google Apps on the 16GB of local storage makes sense.

5. Understand the security implications of using Chromebooks
Google claims that its sandboxing, encryption and recovery capabilities provide a higher degree of security than current PC environments.

Bott asks, whether you’re ready to bet your company on Google’s security feature claims. He also asks whether you want your company’s business data stored on Google’s servers.

These are valid concerns. However, these concerns apply to any corporate use of a web-based technology, be it, SurgarCRM, or Amazon EC2.

Not ever company will be willing to trust their data to Google. But, deciding which users would be the best targets for a Chromebook, and considering the data they access, create and store, will be critical to getting comfortable with using Chromebooks in your enterprise.

Evaluate Chromebooks with a long term view
Consider Chromebooks as a way to make your IT environment more flexible and responsive to users. Don’t ignore Chromebooks because it’s not the right solution for each and every user in your company. Pick a set of users whose needs align with the benefits of Chromebooks and consider a trial rollout.

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.”

Oracle’s recently announced a proposal to move the open source Hudson project to the Eclipse Foundation. Should your company’s stance on Jenkins or Hudson change as a result? Short answer, no. The more interesting question is what this contribution means for the Eclipse Foundation.

Eclipse contribution won’t mend the Hudson & Jenkins split
In explaining Oracle’s proposal, Ted Farrell, Chief Architect and Vice President, Tools and Middleware at Oracle, writes:

…I can’t speak for the Jenkins folks, but one of the good things about Hudson moving to Eclipse is that anyone can participate. When the fork happened, I think it came down to a difference of opinion about how to run an open source project. Oracle and Sonatype wanted more of an enterprise focus, and CloudBees wanted more of a grass-roots environment which is how Hudson came to be. I think both are valid opinions.

So when we started talking about this move to Eclipse, we initially focused on talking to people whose views were more in line with our Enterprise focus. Now that the proposal is public, we welcome anyone to join the conversation over the next 2 months while we finalize the submission and get it accepted.

Farrell makes several points that appear counter to the public record.

First, unlike Oracle, CloudBees relies on Jenkins to power a commercial product aimed at enterprises. To claim that CloudBees has anything less than an “enterprise focus” is curious.

Second, when a community around any open source product up and moves to another location, under a different project name, that’s not a fork – that’s a rebranding. Jenkins community member Andrew Bayer told InfoWorld’s Paul Krill:

The Jenkins organization on GitHub now has almost 500 repositories, the majority of those plug-ins, and almost 100 public members, while Hudson only has its core repository available and only four public members. Of the 25 most commonly installed plug-ins from before the split, 21 of them have moved primary development to focus on Jenkins, with the remaining four not having any changes during that time. In fact, 40 new plug-ins have been added to Jenkins since the split, while only one has been added to Hudson. The development community has definitely made its choice heard.

The lack of community response on the Hudson proposal mailing list at Eclipse is not a very good start for the project. Two individuals that have commented suggest they support the proposal if it will unify the Hudson and Jenkins camps. However, there’ no indication of a Hudson and Jenkins unification occurring as a result of the Eclipse contribution proposal.

Eclipse at risk of becoming a graveyard for abandoned OSS projects
Like most, I’m a big fan of the Eclipse Foundation, not simply because Ian and Mike are Canadians!

However, I fear that Eclipse is at risk of becoming a home for projects whose owners are looking to gracefully reduce their investments while gaining some open source kudos along the way.

Rewind to November 2009 when Oracle and SpringSource jointly announced the Gemini project proposal. Gemini was based on SpringSource’s DM Server technology. Two short months later SpringSource announced the Virgo project proposal to contribute SpringSource’s dm Server to Eclipse. Although SpringSource had been a big proponent of OSGi, OSGi and dm Server became less of a priority for SpringSource after it was acquired by VMware.

SpringSource tried to play up the potential for increased community contributions to the Gemini project.

However, VMware/SpringSource killed off their dm Server product as a result of contributing the project to the Eclipse Foundation. The lack of a product and revenue linked to the Eclipse project should have been a warning sign for the Eclipse Foundation.

A year and a half later, while OSGi support is offered by WebSphere, GlassFish and JBoss, and continues to gain developer attention, the Eclipse Gemini project is stuck in neutral.

Does Oracle, or more importantly, the Eclipse Foundation, truly expect a better fate for Hudson?

Oracle doesn’t have a viable business associated with Hudson. This makes any future investment decisions regarding the project at Eclipse tenuous at best. Cue the graceful exit music.

While I agree that, “if you’re going to kill it, open source it!“, I simply don’t think that the Eclipse Foundation needs to be, or should want to be, the destination of choice for these types of projects.

I hope I’m wrong about the fate of Hudson at the Eclipse Foundation. The Eclipse Foundation is too important to open source projects to become, or even just be viewed as, anything but a leading destination of choice for new and exciting projects.

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.”