Hidden Costs: Oracle On-Premise vs Oracle Cloud

Hidden Costs and Limitations of Commercial Software Solutions

Rather than building your own in-house applications, commercial off-the-shelf software such as On-Premise Oracle E-Business Suite (EBS), or a cloud-based solution may sound like interesting options, but what is best for your situation, and what are the licensing options and limitations?

When considering candidates, considerations should include:

  1. Cloud versus On-Premise. What are the advantages and disadvantages of each solution, and how does it affect your applications usages and needs, now and in the future?
  2. Will the software vendor share a trial version for hands-on evaluation before you commit?
  3. Can I roll back or switch to a different solution mid-term?
  4. What are the hidden costs?
  5. Is the solution customizable to meet your needs?
  6. How much management is required?
  7. How is each solution licensed? Can I use my existing licenses?
  8. Does the new solution fall under the Proprietary Hosting Category and how may that impact the licensing requirements?

Oracle Cloud Options:

  • SaaS (Software as a Service) – This is the “All-in” approach. SaaS providers host an application and make it available to users through the internet, usually a browser-based interface or a mobile app. An application solution in its entirety is provided at a subscription price and is entirely Cloud-based.
    • Advantages include – SaaS customers can deploy the applications without any of the work involved with development, testing, maintenance, updating, etc. Generally, provides a complete offering that addresses a particular business need.
    • Disadvantages include – Maturity, Oracle ERP SaaS offering is not a mature offering. The SaaS application is wholly dependent on the SaaS provider. Security may be an issue. Customizations and modifications are severely limited and usually limited to the modification or creation of reports and fields. Clients do not manage any of their applications, data, hardware, database, or middleware.
  • PaaS (Platform as a Service) – A “Hybrid” solution that requires “lift and shift” of EBS applications to use them with Oracle Database and Middleware Cloud solutions. PaaS solutions appeal to developers who want to spend more time building, customizing, testing, deploying and managing their applications. This is a Cloud-Based software platform that is provided along with the supporting hardware.
    • Advantages include – Software licenses and hardware are all supplied under a single subscription. Clients are able to apply on-premise Oracle licenses to many PaaS Cloud services under BYOL (Bring Your Own License) model. Increased customization and modifications potential. Developers can concentrate on the applications and not the infrastructure and hardware maintenance. Clients manage their applications and data. Clients may be able to roll back to an on-premise solution easier than from SaaS.
    • Disadvantages include – More management, including development work, testing, and QA. Increased customization and modifications open the client up to potentially more licensing costs. A third party manages the hardware, database, and middleware. Solutions may be required to stay on the latest version of the PaaS software, such as the latest version of Oracle Database when under a Database PaaS.
  • IaaS (Infrastructure as a Service) – Another “Hybrid” solution that requires “lift and shift” of Oracle EBS applications. IaaS providers deploy and manage pre-configured and virtualized hardware and enable users to spin up virtual machines or computing power without the labor-intensive server management or hardware investments.
    • Advantages include – This is the most customizable Oracle cloud offering. Bring-your-own-licenses (BYOL) is available, you can apply your Oracle licenses against this environment in a manner that closely matches the performance characteristics of an on-premise solution. Clients can roll back to an on-premise solution easier than from SaaS.
    • Disadvantages include – Increased management. If not bringing your own licenses, licensing is subscription based and your usage must be predictable and spread evenly across the individual months of the term of the contract. Application customizations and modifications may result in additional licensing costs.

Oracle On-Premise:

On Premise is where the customer owns and manages the infrastructure, including hardware, operating systems and databases; and install a packaged system in their data center. Oracle’s E-Business Suite (EBS) is the traditional on-premise solution. EBS consists of a collection of modules integrated into one suite.

  • Advantages include – An extremely mature set of applications. Fully customizable. You can use your existing Oracle licenses. License portability. Perpetual licenses are the most common on-premise licenses purchased. In their full use form, they are generally owned forever.
  • Disadvantages include – Highest level of management, development, testing required. Customizations and modifications may result in additional licensing costs. Upfront licensing costs.

Hidden Costs:

According to Oracle, modifications exceeding the restrictions of the embedded licensing will result in additional licensing requirements. Depending on the customizations, Oracle may require separate licensing of embedded products.  If you customize Oracle E-Business Suite applications, you can no longer use the included restricted use middleware or database. Link


Whether or not a solution should be run from an on-premise environment, hybrid solution, or fully from the Cloud involves specific business and functionality requirements of the solution. Overall, there are plenty of reasons to leverage a Cloud solution, but it is important to evaluate all of your options as well as all of the potential costs and limitations of each.

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