Oracle to overhaul pricing

Database and applications software vendor Oracle will redefine the licensing models for its customers in an effort to consolidate and simplify the grab-bag of charging regimes it has inherited through recent acquisitions.

Oracle president Charles Phillips told Computerworld the vendor is exploring the best way to rationalize the way it sells its software, but insisted it will take its lead directly from customer feedback rather than dictating any new terms to users.

In May 2005, CEO of rival applications vendor SAP, Henning Kagermann, mooted similar licensing changes, but refused to be drawn on specifics.

Asked whether Oracle was considering so-called value-based pricing - where charges are calculated from the customer's base of turnover and revenue - Phillips said Oracle's new pricing models will be "based on business metrics".

"We've been customizing. We'll be offering customers different [licensing models]," Phillips said, adding any new charging scheme would be tailored to best reflect the business value Oracle's Fusion suite will deliver to enterprises.

Asked if Oracle may widen the current PeopleSoft licensing regime (which is calculated as a proportion of an enterprise's gross revenue) to its other products, Phillips said revenue was only one of many metrics used to calculate price.

Other pricing measures Phillips nominated include transactional volume. However, he was at pains to stress users can retain the terms in current licensing contracts with any new scheme being purely voluntary.

He said the new measures "will be an option" for customers of the new Fusion products and categorically ruled out any retrofit.

John Wookey, Oracle's senior vice president for applications development, said a combination of Oracle's growth through acquisition, the consolidation of its products and platforms and the gradual migration towards Web services made the licensing rework necessary.

"We are trying to simplify the licensing - we are trying to have fewer [licensing] products Wookey said, referring to PeopleSoft's revenue-based pricing policy as "interesting".

Wookey said the real driver for Oracle's decision to rebuild its price list came from the evolution of Web services and SOA-based applications rather than the vendor's recent shopping spree, specifically nominating what he termed self-service applications.

These included online leave or expense management packages which were once restricted to regular users in the finance department, but had now been farmed out to occasional end users.

"You don't want a pricing model that discourages people from deploying," Wookey said.

Asia-Pacific IT research director for analyst firm Ovum, Christine Axton, said Oracle's absorption of JD Edwards, PeopleSoft and most recently Retek, had presented "a bigger issue than first anticipated" for Oracle and was likely to be felt most acutely by its sales staff.

Axton said end users would continue to pressure Oracle for hard information on how the vendor's integrated SOA applications code base will be built - either from existing Oracle products or from its acquired applications.

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