Spin Unspun: Adding Up Oracle's New Pricing Plan

By Sean Gallagher  |  Posted 2002-03-18 Print this article 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 suite—a 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.

Sean Gallagher is editor of Ziff Davis Internet's enterprise verticals group. Previously, Gallagher was technology editor for Baseline, before joining Ziff Davis, he was editorial director of Fawcette Technical Publications' enterprise developer publications group, and the Labs managing editor of CMP's InformationWeek. A former naval officer and former systems integrator, Gallagher lives and works in Baltimore, Maryland.

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