Oracle Universal Cloud Credits (UCC): Licensing and Discounting Basics

Since Oracle launched Universal Cloud Credits (UCC), one of their cloud incentive programs that offers universal credits for cloud services, there has been confusion among customers around how Oracle universal credits work and what products and services are eligible under the program.

At UpperEdge, we are seeing more existing and prospective Oracle customers considering investment in Oracle UCC.  However, some do not fully understand what UCCs are, how they are priced, and how to leverage them to use Oracle’s Cloud Infrastructure (OCI).

Below is a high-level guide on Oracle UCC to help you feel empowered at the negotiation table.

What Are Universal Cloud Credits?

Universal Cloud Credits are a flexible buying and consumption program for specific Oracle services.  The UCC program has various pricing models that can provide customers with higher discounting as their cloud usage increases depending on the model they select.

In other words, Oracle’s UCC program allows organizations to use any of Oracle’s cloud infrastructure (IaaS) services or platform (PaaS) services with a great deal of flexibility.

What Can You Use Universal Cloud Credits For?

When it comes to utilizing your UCCs, it is important to note that these credits can only be applied to Oracle’s IaaS and PaaS offerings.  The table below outlines which IaaS and PaaS offerings are eligible under the UCC program as well as which products and services are not eligible.

Eligible PaaS Cloud Services		Eligible IaaS Cloud Services
Analytics Cloud Services		Compute Cloud Services
Application Development Cloud Services		Network Cloud Services
Big Data Cloud Services		Storage Cloud Services
Content and Experience Cloud Services
Data Integration Cloud Services
Data Management Cloud Services
Enterprise Integration Cloud Services
Management Cloud Services
Security and Identity Cloud Services
*Oracle SaaS products and services, on-prem technology products and applications, as well as hardware products are not eligible for UCC.

Oracle IaaS and PaaS service descriptions are available on Oracle’s website.  If Oracle were to add any additional service offerings to the above lists during the term of your contract, you can use those offerings and the applicable discount based on the rate card associated with your contract.

How Does UCC Pricing Work?

Oracle offers multiple subscription models in the UCC program, however, the following two models are the most popular among Oracle customers:

1. Annual Universal Credits

Under the Annual Universal Credits model, customers commit upfront to an annual pool of funds or credits that can be applied towards future usage of eligible Oracle IaaS and PaaS cloud services.  This model enables the customer to have the flexibility to use any Oracle Cloud Infrastructure and platform service at any time and in any place.  This model also provides significant cost savings across all cloud services.

For example, you could have a three-year contract worth $1,000,000 in credits to use towards eligible IaaS or PaaS services.  As your company uses these products over those three years, that use will consume the number of credits designated to you per year, totaling $1,000,000 by the end of year three.

With this model, there is a potential risk of not fully utilizing your prepaid credits.  If, during negotiations, you overestimate how much usage you’ll need for the contract term, you may be stuck overpaying for the services outlined in your Oracle deal since this model requires you to pay upfront at the beginning of the contract term.

Thus, this model is most suitable for customers who know the services they want to use, have an understanding of what their usage will be over the length of their contract term, and are willing to make an upfront commitment for reduced pricing.

2. Pay As You Go (PAYG)

Under the Oracle Pay As You Go model, customers are billed in arrears based on actual monthly consumption.  Customers are only paying for what they use, and can quickly provision their services with no significant commitment.  IaaS and PaaS services consumed are metered based on actual consumption.

Though this option can be pricier, it offers a great amount of flexibility since you don’t have to commit to a minimum monthly spend amount.  Customers should opt for the PAYG model if they are still determining what Oracle cloud services they will use, they want to pay for actual usage overtime instead of committing upfront, and they want to pay fees based on the terms negotiated in your Oracle contract.

Negotiating Annual Universal Credits

Since the Annual Universal Credits model requires upfront commitment with a fair amount of risk, it is critical that you position your organization strategically at the negotiation table.  If your company decides that the Annual Universal Credits model makes the most sense for you, we recommend negotiating the following commercial terms:

3. Discounting

The UCC discounting structure is the main cause of confusion among enterprise customers who are trying to use the offering.  Specifically, it was unclear what products and services these discounts applied to.

The UCC discounting that you negotiate applies to the Oracle Universal Cloud Credits rate card pricing for PaaS and IaaS public cloud services.  Below is an example of what this discounting could look like, with the discount that you negotiate appearing to the right of the various cloud products in your contract:

Cloud Service Category	Discount %
Application Development Cloud Services
Compute Cloud Services
Storage Cloud Services
Management Cloud Services
Network Cloud Services
Analytics Cloud Services
Ravello Cloud Services
Big Data Cloud Services
Enterprise Integration Cloud Services
Data Management Cloud Services
Content and Experience Cloud Services

The most important element to negotiate in your UCC contract in regard to the discounting is requesting that Oracle provide a volume discount structure based on the different levels of prepaid credits you might be considering.

Under a volume discount structure, if your UCC contract falls within the $500K-$1M range, you’ll receive X% in discounting, as determined by Oracle.  If your contract is worth $1M-$5M, you’ll receive Y% in discounting, and if your contract is greater than $5M, you’ll receive Z% in discounting.  Oracle already has these discounts on-hand, but they won’t be upfront with this structure without you bringing it to the table first.

The key takeaway is to recognize that this volume discount structure exists, and you should ask Oracle to provide you with that discount information.  Regardless of what they tell you, having that knowledge will allow you to try to negotiate a better rate to maximize your savings.

4. Pricing Transparency

Currently, Oracle has their price list available on their website, making the list price for the IaaS and PaaS products associated with your contract public knowledge.  However, Oracle has the discretion to remove the list pricing from their website or change the list pricing at any moment.

Because of this, we recommend requesting that Oracle provide full pricing transparency as part of your IaaS/PaaS rate card in your UCC contract.  You want to request this transparency for the Unit List Fee, the Unit Net Fee, and the Overage Net Fee.

You especially need to pay attention to the Overage Net Fee listed in your contract.  This is the price that will be applied to your cloud product usage if you finish consuming the amount of universal credits allotted to you before the end of the year or contract term.

Ideally, the Overage Net Fee is the same as your discounted Unit Net Fee, but that is not always the case.  Asking for pricing transparency ensures you always have access to Oracle’s list pricing throughout the term of your contract and it allows you to negotiate your Overage Net Fee down to the discounted price.

The Bottom Line

Oracle’s UCC program could offer a great opportunity for increased flexibility and reduced costs, but it requires you to understand what services you need and how much of them you need.  Thus, it is crucial you recognize what the program is, what products it applies to, and which subscription model is the best fit for your organization to maximize your savings and get the best Oracle deal possible.

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