Oracle revamps E-Business pricing scheme

Oracle Corp. has altered pricing terms for its E-Business application suite in attempts to make it more affordable for small- and medium-sized businesses (SMBs) and to provide more flexibility for enterprise clients.

As of Monday, Oracle, based in Redwood City, Calif., announced it was scrapping its requirement that customers spend a minimum of US$250,000 to be eligible to purchase its suite. Also, it has lessened the required number of employees that must be licensed to use the suite from 20 per cent down to 10 per cent. In order to meet these requirements a business would need to have a minimum of 567 users, said Oracle Vice-President Jacqueline Woods in January 2002. One Canadian analyst noted that in the Canadian market, a large enterprise is defined as a business with 500 users or more. Since the large majority of Canadian businesses fall into the SMB category, this in effect, could put the E-Business Application out of reach.

The company said these reductions are an effort to make the suite more tantalizing to the small business palate that might have been averse to the minimum entry requirements.

Oracle has also altered the cost customers would pay per user. Previously, a customer paid US$4,000 per professional user and US$400 per employee user. Now the price threshold has been dropped to US$3,995 per professional user, and US$995 per professional external user. A professional external user is a contracted or outsourced employee who requires the same functionality as a professional user.

An employee user is an individual who only uses one of the self-service applications sold separately from the suite, such as Self Service HR, and these user costs have been dropped to US$35.

Warren Shiau, software analyst with IDC Canada Ltd. in Toronto, said cost savings would depend on the type of users a business is licensing.

“If they have a lot of people who are going to be, in Oracle’s terminology, employees, that decrease from US$400 to US$35 can make a significance difference,” Shiau said. “As well the decrease for smaller- or medium-[sized] companies from the US$250,000 minimum – now that that has been eliminated [it] can lead to a significant price decline for someone who is looking at Oracle.”

Shiau explained that throughout the entire IT sector enterprise application vendors have been facing a high degree of price-pressure, and are having a hard time selling new software licenses. In response, he said these vendors have been restructuring their pricing schemes and restructuring how product lines are organized or how they can been bought.

“For example, enabling more modularized sales, or more add-on sales and this is exactly what Oracle is trying to address,” he said.

These self-service applications that used to come integrated with the E-Business Application suite have now been removed, but Oracle has decided to make them available for purchase separately, such as in the case of its Self Service Human Resources (HR).

Oracle said this was done in an effort to consolidate the suite down into a core set of functionalities that are needed for enterprise resource planning (ERP) and customer relationship management (CRM), and those who require more specialized functions can now add them as-needed.

“When vendors do this with integrated enterprise application suites it is usually in recognition of the fact that the small SMB market just doesn’t need the functionality an enterprise client is going to need,” Shiau said. “They are not going to pay for functionality they don’t need.”

Shiau said not only is this strategy an attempt to attract SMB customers but it also gives additional flexibility for enterprise customers to add users or modules.

“It works on both sides,” he said, but he added that in the end this cost restructuring is more beneficial to SMBs.

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