By Phil Jones
Oracle Corp chief executive Larry Ellison has promised that all of the company’s products will be available at a standard price from its internet purchasing site by June next year, insisting that the only leverage [on prices] will be volume discounts.
Ellison said standard pricing was only part of a fascinating transition [that Oracle is going through] as we become an e-business. The company is also preparing to centralize all its business functions, and to adopt a truly global structure that will eradicate regionalism, which is fundamentally wasteful, he said.
The move to standard pricing will be forced on all companies by the internet Ellison believes, because one of its most profound effects will be on the procurement practices of large companies.
Today we [the business community] spend a lot of money buying things, and we do it with stunning inefficiency, Ellison said. In future companies will hold an auction on the internet to buy certain goods and services, and for others they will expect to buy them online in an easy and unconfusing manner. There is going to be a global market, global prices, and market transparency because of the internet, said Ellison. There will be no hiding place, we won’t be able to charge different customers different prices for the same products, he continued.
Ellison’s promise suggests that long-term practices that have rankled software buyers, such as different price lists in different countries, may finally become a thing of the past. However, he said that Oracle is unlikely to adopt a metered approach to software pricing, which would enable customers to access products as they are required, and pay for them on a usage basis. Oracle products will still be licensed according to the size of server supporting them, or the number of users that can access them, he said.
I think people don’t like metering. Even in the telecoms market there is a move towards flat-fees for services Ellison said. Internet-based procurement may also help to drive Oracle’s prices down. As well as being standard, Oracle’s internet pricing will be very aggressive Ellison said.
The consequences of e-commerce for Oracle’s prosperity were an area that Ellison was less explicit about. Although he said the software industry may become more profitable before by taking advantage of the economies of scale which the internet can realize in distribution, and in many other areas, the route to e-commerce effectiveness may not be painless for the database giant.
One characteristic of the thin-client world of the internet is the new ease with which users will be able to access software products and services. Ellison acknowledged that this places a question mark above the $500m in revenue Oracle generates from training services each year.
