This article is part of our 10-part series on Oracle’s Cloud Infrastructure (OCI).
This article is basically a summary of the contract types available to OCI customers, as described in the Oracle PaaS and IaaS Universal Credits Service Descriptions document (pages 23-27). I’ll add in my thoughts and suggestions on each option and which I find to be appropriate based on the customer’s state on the cloud journey. As always, I strongly urge anyone considering OCI to read the lined PDF themselves. Below is a summary:
- Annual Universal Credits (AUC).
- You buy Universal Credits and apply them to any combination of OCI usage. By making the commitment, you get a discounted rate on the OCI services.
- Your Universal Credits balance is deducted monthly based on your actual usage.
- IMPORTANT – Any unused credits at the end of the 12-month period are forfeited.
- If you over-use and exhaust your annual Universal Credits, then your rates for OCI usage will revert to a separate (higher) rate specified in your OCI agreement. Generally, this is OCI list price.
- At the end of the 12-month (or longer – as negotiated) service period, if you do not renew your Agreement, then your account will be converted into a Pay as You Go model at list price.
- Monthly Universal Credits (MUC).
- You buy Monthly Universal Credits (MUC) and commit to spending a certain amount on a monthly basis. You may apply your MUC to any combination of OCI usage. By making the commitment, you get a discounted rate on the OCI services.
- IMPORTANT – You must consume the each month’s MUC commitment or forfeit any unused quantity.
- Your Universal Credits balance is deducted monthly based on your actual usage. Any under-usage will be forfeited, and any over-usage will be billed at list price.
- At the end of the 12-month Services Period, if you do not renew your Agreement, then your account will be converted into a Pay as You Go model at list price.
- Pay as You Go.
- As the names suggests, there is no commitment of any sort. You pay OCI list prices for services as and when used, invoiced monthly.
- No discounts are generally available for Pay as You Go accounts.
- Funded Allocation Model (FAM).
- This one is interesting. It involves making a 12-month (or longer) spend commitment – the Funded Allocation Value, but you are only billed for what you use on a monthly basis.
- There is no forfeiting of any unused or under-used amount, either on a monthly basis or at the end of the contract period. You simply need to ensure that a funding source is available for the monthly invoices. If, for example, you get to the end of the 12-month period, and you under-used the initial spend allocation for the full year, there is no credit that will be forfeited.
- If you consume all of your FAV before the end of the 12-month period, your rates will switch to an overage net price specified in the agreement. Generally, this tends to be OCI list price.
- At the end of the FAM services period, if you do not renew the contract, you will be switched to Pay as You Go model, and billed monthly at OCI list prices.
Which Model is Best For You?
That depends on where you are in the cloud journey. For my clients who have not made any move to OCI yet, I generally advise going with Pay as You Go or FAM. This frees them up to test the waters first without the risk of over-committing. Generally, once non-production workloads have started moving to OCI and the technical landscape has been properly assessed and meets requirements, it makes sense to make a deeper OCI commitment and exploiting higher discount rates. I generally advise my clients against making large AUC or MUC commitments if they have not set foot in OCI at all. An obvious risk is making a large financial commitment to later on find out that OCI is not a good fit. Additionally, more often that not, the actual cloud migration process may be delayed as your internal resources, and/or Oracle Partner and/or Oracle ACS plan the lift-and-shift. Several months may pass before you are able to leverage your OCI investment. All that while you risk burning OCI credits. Consider a $1M OCI AUC agreement. If your lift-and-shift starts 4 months after signing the agreement and takes 3 months to complete, then you would have 5-8 months to consume your $1M AUC commitment. If you estimated it would take 12 months to consume $1M at full utilization, then you risk ~$300K in forfeited AUC by the end of the 12-month period.
In short – start small, and match your OCI contractual commitment with your actual move to OCI as things progress.
In the meantime, if you need any assistance with detailed and methodical migration planning to OCI, and need any help with pricing and forecasting, we can help. As part of our process, we perform a server-by-server analysis and map it to an optimized destination in OCI, with detailed price breakouts. This way, you can have a precise cost assessment for OCI (your expected OCI spend in year 1) and your technical team will have a cost-optimized blueprint for moving to OCI.
As always, feel free to contact us for a complimentary consultation. Contact Us.