Oracle explains new 11i pricing

Oracle Corp. on Tuesday laid out some customer requirements for the recently announced flat pricing model on its E-Business Suite 11i and changed the user definitions it had given last week as part of the terms for eligibility.

The simplified pricing model is based on two types of licenses priced at US$4,000 and US$400 per user that cover the bulk of Oracle suite of enterprise applications. To qualify for that pricing, a customer has to spend $250,000 or more and buy licenses of each type for at least 10 per cent of its staff, so 20 per cent of the staff is licensed, Oracle vice-president Jacqueline Woods said Tuesday in a conference call with reporters.

In order to meet the US$250,000 threshold with the minimum license requirement, a company would have to have at least 567 employees, Woods said.

Oracle renamed the “power” and “casual” user licenses, introduced by Oracle chairman and chief executive officer Larry Ellison two weeks ago at the company’s European AppsWorld conference here, to professional” and “self service” user licenses. Ellison on Jan. 17 gave the flat prices and said they were available immediately, without further details, raising questions from users and analysts.

Oracle had defined the power user as someone whose primary job function utilizes a core application in the suite. The new definition of “professional” user “doesn’t have anything to do with the intensity of the use or the frequency of the use,” Woods said. Anybody who utilizes the core application and not the suite’s self-service tools is considered a professional user, Oracle said.

All licenses are named and perpetual, Oracle said, adding that the holder of a professional license can use the self-service features without needing a self-service license. Every employee who might use a self-service function – for example, an employee who files an expense or benefits form – will need a license, Oracle said.

The flat pricing model is cheaper only for those customers that don’t limit themselves to individual parts of the E-Business Suite, but want the entire range of applications, Woods said. This may indicate that Oracle wants to move customers toward buying more of its applications, instead of cherry-picking from its broad menu.

“Effectively, for many customers, on a per-person basis, you would see a price decrease – if you want all the functionality (of the E-Business Suite) – of 25 to 75 per cent. Niche pricing and component pricing will still be available for those customers who wish to go that route,” she said, calling the flat pricing “an augmentation of the pricing model for our E-Business Suite.”

The flat pricing model is valid for most modules of the E-Business Suite, but not all. The payroll module, for example, electronic order entry is priced per order, the advanced supply chain management costs US$1,000 per million dollars of goods sold, Oracle said.

Current customers wanting to migrate to the new pricing model can get credit for the net license fee paid, Oracle said. The new pricing will go into effect on Feb. 1, instead of on Jan. 17, as Ellison had stated. Oracle sales representatives will be able to offer customers the new pricing starting on Feb. 1, but Oracle’s online store won’t have the new pricing until March 31, according to an Oracle statement.

The Oracle Applications Users Group (OAUG), which was briefed by Oracle on the new pricing late last week, still has questions, said Jeremy Young, the OAUG’s president.

“So far we’re still not completely clear. We would like to see some work examples, have it set out in paper or on the Web completely so that we can do comparisons. We asked Oracle to provide us with some work examples, so we could see how it worked practically,” said Young.

The OAUG also found that Oracle’s sales people so far have been ill informed on the new pricing scheme, which could be the reason for moving up the availability date.

“I know that some users have asked their sales person to calculate how the new plan would work for them and I know of at least three sales people that don’t have the details yet and can’t give a quote. I also can’t see it on the Oracle Web site,” said Young.

Oracle Canada in Mississauga, Ont., is at