Oracle Simplifies Pricing to Ease Confusion

The database vendor is helping customers make sense of its large menu of applications.

Oracle (Quote) unveiled a new pricing model that should smooth the implementation path for customers thinking about buying its applications.

The new structure will be applied across the company's entire portfolio, including applications inherited with the acquisitions of JD Edwards, PeopleSoft and Siebel.

The new scheme will also be applicable to Oracle's homegrown E-Business Suite products.

Customers will have a choice of four basic licensing models.

The models include a simple "component"-based a la carte option primarily based on a named user metric and a custom application suite model that lets customers create bundles based on their specific needs.

There is also an enterprise applications model, with pricing based on an enterprise metric such as revenue or number of employees and a model for small- and medium-sized businesses (SMBs) for companies that generate less than $100 million in revenue.

Oracle will continue to charge 22 percent of net license fees for customer support.

Jacqueline Woods, vice president of global pricing and licensing strategy at Oracle, said the new pricing structure is intended to help customers chose from the company's increasing number of products.

The simplified licensing model is intended to create consistency across all product lines, a particularly important feature given the number of pre-existing and newly acquired products.

Customers can also choose to use previous pricing models when purchasing additional products from old price lists, and can move from one new model to another as their needs evolve.

This is not the first time that Oracle has resorted to changing up its pricing structure; only last year, the vendor created a new pricing scheme to lure users to its latest software running on multi-core processor machines.

At the time, the Redwood Shores, Calif.-based company was hoping to assuage customers angry at having to pay for each socket or core in a multi-core chip.

Today's news comes a day after Oracle announced its second quarter revenues, which were marked by weaker-than-expected software license sales.

Oracle said the shortfall occurred because it failed to close a certain number of large deals, but said it expected them to close during the third quarter.

While the new pricing structure was clearly not thrown together as a reaction to yesterday's release, it may well reflect a growing sense among Oracle executives that it has been confusing customers by adding to its product portfolio so much in such a short period.

"When you continue to add new assets on a quarter by quarter basis, you can run into problems confusing customers who wonder how it all fits together," said Pund-IT analyst Charles King.

King added that enterprise customers are likely to hold off on signing a deal if they think that more products are just over the horizon.

"You don't want be half way down the and find there features that are better suited to your needs," he told

The flexibility offered by the new pricing model could put those fears to rest.

"Opening the menu for people to put together new and interesting meals commensurate to their appetites is a very good way to go," he said.

Peter Goldmacher, who follows enterprise software for SG Cowan, said he thinks Oracle is well placed to take advantage of customer desires to spend a greater proportion of their IT budgets with fewer vendors.

"Oracle's multi year move to consolidate the software space is an aggressive but thoughtful way for the company to stay on top in the software world," he wrote in a research note.

He added that he thinks that "Oracle's strategy will pay off as the company continues to grow over time."

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