Oracle’s revamped 11i pricing raises questions

Oracle Corp.’s simplified pricing model for the E-Business Suite 11i so far is causing confusion instead of clarity, and the Oracle Applications Users Group (OAUG) plans to raise the issue with Oracle later this week.

Larry Ellison, Oracle’s chairman and chief executive officer, last week called his company’s pricing for 11i complex and announced flat pricing: US$4,000 for a “power user” and US$400 for a “casual user.” No further details were released.

“It sounds very simple, but it is not clear how it is going to work,” said Jeremy Young, president of the OAUG in an interview. “The OAUG will be talking with Oracle in the pricing council on Thursday and we want some clarification.”

The OAUG’s top concern is what the pricing change will do for those modules of the E-Business Suite that were not charged per user, said Young. This includes human resources (priced per employee), procurement (priced per order line), online storefront iStore (priced per processor) and advanced supply-chain planning (priced per million dollars of goods sold.)

“If you’re a big customer and you bought individual bundles for your users, the price sort of evens out with regard to the bundles, but we’re not clear about the differently priced parts,” said Young, noting that many modules cost about US$4,000 per user.

Another issue for the user group is migration from the old pricing scheme to the new one, said Young.

“Various pricing models have been used over the years,” he said. One question, he said, is whether current users would have to pay more to add additional modules.

Meanwhile, Oracle on Tuesday provided definitions for the user types, clearing one other major question mark.

“An Application Power User (APU) is defined as an individual whose primary job function utilizes the program to perform their job, regardless of whether the individual is actively using the programs at any given time. Additionally, the individual must be authorized by the customer to use the application programs, which can be installed on a single server or on multiple servers,” Oracle said.

“An Application Casual User (ACU) is defined as an individual whose primary job function is not determined by the utilization of the application. An Application Casual User will typically perform queries or run reports against the application and/or infrequently update data,” Oracle said.

One analyst shrugged at the definitions.

“This just brings more questions into mind. Somebody who doesn’t use this too much, who is that?” asked Bill Clough, research manager at analyst firm International Data Corp. (IDC). “Lets try and scenario this out. Is a sales person somebody who doesn’t use it too much? It is their primary IT system, but what if they spend most of their time on the phone?”

OAUG President Young feels the definitions are workable.

“This sounds quite good. Somebody in human resources or the purchasing department would be a power user, while a manager who just for 20 minutes in the morning would authorize purchases would be a casual user,” he reasoned.

IDC’s Clough said that although the software price might be clear, the customer still has the services bill, typically covering implementation and consulting costs, to deal with. Users often pay implementation and consulting fees to Oracle

“The biggest part of the IT bill is the services cost. Yes maybe the pricing change would make a portion of a customer’s software implementation less confusing, but there still is the services side, which is often bigger and very much unknown,” Clough said.

Oracle on Tuesday also said its old per-module pricing model is “still available.” However, a spokeswoman couldn’t say if the old menu of prices is available indefinitely, or just until the new model has been completely worked out.

Clough expects Oracle to completely move to simple pricing, mimicking Microsoft Corp.’s pricing for its Office suite of productivity applications.

“The overarching message from Oracle is that they want to become the Microsoft of the enterprise-applications area. One of the things they would have to do is have a very basic pricing structure,” he said. “Oracle is not doing this (changing the pricing) to get more money out of each installation, but the company is really banking on the suite message.”

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