(Fwd) Computerworld request for comment and input [Oracle price gouging]

( REPLY DIRECTLY TO: Dan_Verton_at_computerworld.com )

• Forwarded message follows ------- Date sent: Wed, 04 Oct 2000 13:00:58 -0800 To: Multiple recipients of list ODTUG-DEV2K-L <ODTUG-DEV2K-L_at_fatcity.com> Send reply to: ODTUG-DEV2K-L_at_fatcity.com From: "Scott W. Nelson" <snelson_at_rtt.com> Subject: Computerworld request for comment and input Organization: Fat City Network Services, San Diego, California

I received this email from Dan Verton, a writer for Computerworld. If you would like to respond to his request please do so directly to him at Dan_Verton_at_computerworld.com and not to the list.

Thanks,

Scott Nelson
Sr. Analyst
RTT, Inc - Indianapolis
Vice President, Oracle Development Tools User Group http://www.odtug.com

Plan now for ODTUG 2001 June 24-28, Sheraton Hotel and Marina, San Diego, California. http://www.odtug.com

Oracle Users:

Dan Verton here. I'm a senior writer with Computerworld. Many of you are probably familiar with our publication and the fact that we ran a story a few weeks ago about dozens of oracle users complaining about what one CIO called "extorshionist" pricing. I had the chance yesterday to ask Oracle CEO Larry Ellison about this and I would like to hear from any of you who are willing to comment. I plan to run a follow-up to the pricing story in this Monday's issue. My deadline for hearing back from you is Thursday at 3PM EST. Please inlcude your title if you choose to respond.

According to Ellison, "the market has voted" and Oracle is not the only vendor to use capacity-based pricing. He also said that Oracle's customers are Happy with it and happy with the amount of choices Oracle offers on the pricing front, adding that no other vendor offers more of a choice. he also cited the fact that people are buying more than ever, so that is evidence that users are happy with the pricing.

Below is the text of our original story. I hope to hear form some of you shortly. I'm traveling back to the office from the OpenWorld conference today, so email may be best.

Many thanks Dan Verton Senior Writer Computerworld 703-321-2277

Users perturbed by Oracle prices

New capacity-based model for 8i database can be costlier; company stands its ground

By DOMINIQUE DECKMYN AND JAIKUMAR VIJAYAN (September 18, 2000) A new pricing scheme that Oracle Corp. hoped would make its database pricing simpler and more predictable is costing some customers more money and causing at least a few to look to competitors such as IBM and Microsoft Corp. In interviews with Computerworld, more than a half-dozen users and potential users of the Oracle8i database complained about the capacity-based pricing, which was announced last year and went into effect across the board in the last quarter.

"Their licensing recently has been extortionist," said Jim Prevo, vice
president and CIO at Green Mountain Coffee Roasters Inc. in Waterbury, Vt., a few weeks after reaching a licensing deal for a hefty Internet server.

Oracle's 8i pricing is based on a measure it calls the universal power unit. The UPU is calculated by multiplying the number of processors by the processor speed. That number is then multiplied by the price per UPU, which is currently $100. For an eight-processor, 700-MHz Intel-based machine, that comes to $560,000.

Tim Talbot, vice president of information technology services at PHH Vehicle Management Services LLC in Hunt Valley, Md., balked. "I said, 'Wait a minute. You are charging us for the whole server, but we are only using part of the server for Oracle.' " Talbot said he was able to get some concessions after negotiating and

threatening to go with Sybase Inc. instead. "It's feeling like I'm negotiating with [Computer Associates International Inc.], which is not a pleasurable experience," he said.

Jacqueline Woods, vice president of global practices at Oracle, said the pricing scheme was an attempt to simplify the pricing model and make prices more predictable by eliminating widely varying discounts. The scheme replaced concurrent and named user pricing, as well as a Web-specific license based on 50

concurrent users, all of which were often heavily discounted. Named user pricing is still available as an alternative in some cases.

Woods said the elimination of discounts beyond volume discounts is what may have upset some customers. "Today, if your volume means you get a 25% discount, then that's your discount," she said.

But users said it's not quite true that discounts no longer exist, as exceptions to UPU pricing are available. Woods said that in some cases, users who can prove that only part of their server is to be used for the Oracle database could get an exception and pay for a lower UPU count.

Prevo responded, "It's not the discount; it's the total amount that's just too high." He said the price quoted to him by Oracle was about "10 times" what Microsoft would charge on the same configuration, and a flat comparison among the three major vendors does show significant price differences.

Prevo did end up buying Oracle, he said, after negotiating a way around the UPU scheme, which lowered the total price.

Stephen Coleman, chief operating officer at SpotOn Inc. in San Bruno, Calif., built his Web navigation service figuring he would host on Oracle - until he saw the price. Oracle's price "was going to be prohibitive," especially for upgrades, said Coleman, so he ported his system to IBM's DB2. (Woods said Oracle does offer start-ups the option of a two-year
"term license" for 35% of the price of a perpetual license.)

What's happening to Oracle's users is similar to what happened to mainframe users a few years ago, said David Floyer, an analyst at ITCentrix Inc., a consultancy in Mountain View, Calif. As markets mature - and user dependency on a product grows - vendors with dominating market shares are able to more easily push pricing models that can end up being extremely expensive if users aren't careful, Floyer said. He advised customers to negotiate long-term contractual safeguards.

Ditka Reiner, president of Reiner Associates Inc., a San Rafael, Calif.-based consultancy that helps companies negotiate contracts, also compared Oracle's pricing model to that of mainframes. "I've talked to two or three clients that said they'd walked away from Oracle because of this pricing model," she said.

Woods said customers will come to appreciate the terms. "The more I talk to [users] and the more I am able to articulate it, the better reception I am getting," she said.

-- 
ODTUG 2000 was a great success!  Visit our website at www.odtug.com for
photos, highlights and presentation handouts.  And plan now for ODTUG
2001 (June 24 to 28) at the Sheraton Hotel and Marina in San Diego, CA.
-- 
Author: Scott W. Nelson
  INET: snelson_at_rtt.com

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