Spin Unspun: Adding Up Oracle's New Pricing PlanBy Sean Gallagher | Posted 2002-03-18 Print
There's more to Oracle's latest price cut than meets the eye.
In January, Oracle announced a new licensing plan for its 11i business-management software suitea flat rate of $4,000 per user for access to all its applications. Oracle Vice President Jacqueline Woods says the new pricing model could save customers 25% to 75% on their costs.
But there's less to this cut than meets the eye for many customers. First, the minimum license fee is $250,000, so a company would have to buy for at least 63 users. The seat-license price also is close to the cost per user of some products within 11i under Oracle's current pricing plan. Oracle Financials, for example, currently costs $3,995 per user. So, indeed, customers would save significantly if users who needed access to more than one of the applications in the suite use them on a regular basis.
But that's not close to 75% of a typical customer's work force. "Out of the population of people using Oracle at a company, that's maybe 15% or 20%," says Lance Travis, an analyst at AMR Research, a Boston-based consulting firm.
Oracle has good reason to slash its prices. Software sales dropped by 26% in the November 2001 quarter compared to the prior year, and weak sales are expected for the quarter ended Feb. 28.
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