By Siobhan Kennedy in Orlando
In an unprecedented move for an enterprise software vendor, Oracle Corp plans to publish the prices of its application software on its web site within the next five to six weeks. A spokesperson for Oracle, who wished to remain anonymous, told ComputerWire that the company already publishes prices for database, tools and technology licenses but this will be the first time the vendor has publicly issued prices for its applications software. It’s unprecedented, said Pierre Mitchell, senior analyst, enterprise applications for AMR Research in Boston. Other companies have well understood pricing algorithms and mechanisms but the actual value of the software is dependent upon the value proposition, discounts and so on. ERP vendors never issue set prices for their applications.
Just last month, when rival vendor SAP AG outlined its new internet strategy, mySAP.com, the vendor was characteristically tightlipped about pricing. We don’t discuss pricing, one executive told ComputerWire. While the company was happy to talk pricing paradigms, it wouldn’t talk dollars, and the same is true for the majority of ERP vendors. Mitchell applauded Oracle’s move, saying it was part of the vendor’s wider strategy to introduce a no haggling policy when it comes to buying software. And it’s been similarly upfront about other areas of business. When the company changed its database licensing model from user-based to CPU-based, Oracle published figures saying it would cost $240 x number of CPUs x MHz. Although analysts at the time said MHz is an inadequate metric, they agreed it is irrelevant compared to the benefits of openly publishing a comprehensible and flexible model. And likewise, when it introduced its Business OnLine application hosting initiative, Oracle openly quoted figures of $895 per user per month.
With ERP applications, more often than not a company will spend months evaluating several vendors’ offerings, decide to go with one for its superior functionality and then change its mind at the last minute when another supplier swoops in and undercuts that offering, Mitchell said. We’ve seen it happen so many times, said AMR’s David Caruso, a customer will make the right decision based on technology and then waste all their time and effort by going with another vendor just because it offers a bigger discount.
This is Oracle saying pricing is not an issue, both to its customers and competitors, Mitchell said, it will make it much easier for users to plan their budgets. They can literally go onto the web site, add up the separate prices and get an overall cost for implementing the applications they want, without even talking to Oracle. Mitchell said it still isn’t clear whether or not Oracle would charge for access to its applications on an a la carte, per module basis, or an all-you-can-eat for one price strategy, as SAP will do for all its applications from now on. But the point is that all users will be charged in the same way, based on standard module costs, he said.
The spokesperson for Oracle said the move to release applications pricing was issued directly from CEO Larry Ellison himself, in a bid to make other ERP vendors follow suit. We’re throwing down the gauntlet to the rest of the industry, the spokesperson said, no one’s ever done it before. The benefit to the user is that he or she gets all the information upfront without having to enter into costly negotiations. It’s one price fits all. He added that Oracle is approaching the new strategy from a revenue neutral standpoint at the moment but admitted we think it will make us more money in the long term because customers will love it. He said, it will be hard for PeopleSoft or SAP not to fully disclose their pricing now. รก
