Oracle modifies pricing, bundling of applications

Looking to boost sales of its enterprise applications, Oracle Corp. has announced new software licensing terms that it said will make it easier for users to qualify for the flat-fee pricing the company put in place 14 months ago.

But Oracle is also removing some products from the software bundle covered by the flat-fee approach, which lets users license a set of the company’s E-Business Suite applications for a single price. The modules being excised, which are primarily user self-service tools in areas such as human resources, will now have to be bought separately, Oracle said.

On the plus side, Oracle is eliminating a requirement that customers spend at least US$250,000 to qualify for the all-encompassing pricing. It’s also reducing from 20 per cent to 10 per cent the minimum number of employees for which a company needs to buy licenses.

“We’ve streamlined (the pricing) and made it more flexible, not only for smaller customers, but (also for) larger customers,” said Jacqueline Woods, vice president of global practices at Oracle.

Company officials decided that the previous user-licensing minimum “was more than the market could handle under the current economic conditions,” Woods said.

The changes could help some companies reduce their licensing costs, Woods said. But users will still be able to buy any of Oracle’s applications on an individual basis if that’s less expensive than the flat fees are, she said.

In addition to the pricing changes, the company renamed the software E-Business Suite 2003.

At the independent Oracle Applications Users Group (OAUG) in Atlanta, the jury is still out on the new pricing scheme. “We have to keep in mind the global aspect of this and wait for input from members,” said Pat Dues, an OAUG board member who works as a project officer at the Las Vegas city manager’s office.

Frank Milano, CIO at Terracon Inc., an engineering consulting firm in Lenexa, Kan., said he may consider using the new licensing approach if he expands his installation of Oracle’s enterprise resource planning applications.

“As a CIO, I always think that their pricing is too high,” Milano said. But the licensing changes make it look like Oracle is “starting to become market-driven,” he added.

Like SAP AG, Oracle has had a mishmash of pricing structures because it offers such a wide range of applications, said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif. The flat-fee pricing scheme was designed to address that, but Greenbaum said the US$250,000 minimum buy-in figure was a deterrent to smaller companies.

James Niccolai of the IDG News Service contributed to this report.