Oracle revamps app pricing; impact unclear

Oracle Corp. CEO Larry Ellison last week disclosed that the company is modifying the way it prices its business applications by implementing flat per-user fees for power and casual users. But the full ramifications of the pricing change remained unclear.

Ellison said at the European version of Oracle's AppsWorld conference that the new fees are an attempt to simplify the pricing of its E-Business Suite 11i applications. License fees for the full suite will be US$4,000 per power user and $400 per casual user, he said.

Oracle's previous approach, with separate prices for application modules, "was very complicated," Ellison said. "We had all these complex matrixes." He said the new fees are "the complete price list for everything you want."

The change is similar to the database pricing with flat per-processor fees that Oracle implemented last year. But Oracle couldn't provide full details on how the new pricing will work, saying more information would be available "shortly." A key unknown is how Oracle will define what separates a casual user from a power one.

Hal Kuff, systems and network manager at Tessco Technologies Inc., said the new pricing might make it feasible for the Hunt Valley, Md.-based wireless technology vendor to expand its internal usage of Oracle's applications.

Kuff said he welcomes the recognition that customers such as Tessco have a mix of users, some of whom require full application functionality and others with "inquiry-only and light transaction" needs. But he said he's "anxious to receive clarification on what exactly a casual user is."

Oracle previously made similar distinctions in the pricing for some application modules. For example, the store on the company's Web site lists "user" and "read-only user" prices for its financial applications.

But Katherine Jones, an analyst at Aberdeen Group Inc. in Boston, said an individual end user could qualify as a power user of one module and a casual user of others. She added that companies may prefer to continue negotiating site licensing with Oracle.

"It looks like one of Larry's shot-from-the-hip pronouncements," said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif. But the fees do appear to bring Oracle's prices within range of what rival SAP AG charges, he added.

Jeremy Young, president of the Oracle Applications Users Group in Atlanta, said the pricing model "sounds very interesting." But users will need to compare the new prices with what they were paying for the software under Oracle's old licensing approach, said Young, who is a business process manager at Brussels-based DHL Worldwide Network NV.

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