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Really simple pricing
December 19, 2005
The latest sign that the traditional software pricing model is coming apart at the seams arrives in a press release today from Oracle. The software giant is rolling out yet another new pricing regime as it tries to adapt to the spread of multicore chips in the various corporate servers which run its software. In the first sentence of the release, Oracle promotes its latest scheme as a manifestation of "its continued commitment to provide customers with simple, flexible and transparent licensing models."
Simple? Here's the company's description of its new policy:
While Oracle will continue to recognize each core as a separate processor, the processor definition has been amended as it relates to counting multi-core chips to determine the total number of processor licenses required. Now, the required processor licensing is dependent upon the specific multi-core chip on which the Oracle software is deployed.
Oracle Processor Licensing: Processor Factor
UltraSparc T1: 0.25
AMD/Intel: 0.50
All other Multi-core Servers: 0.75
Single Core Servers: 1.00For example, if an AMD, IBM, Intel or Sun UltraSparc T1 multi-core server was installed and/or running Oracle software on 8 cores, the licenses would be calculated in the following manner:
-- IBM multi-core server -- Requires 6 processor licenses (8 multiplied by a factor of .75 equals 6)
-- Intel or AMD server -- Requires 4 processor licenses (8 multiplied by a factor of .50 equals 4)
-- Sun UltraSparc T1 server -- Requires 2 processor licenses (8 multiplied by a factor of .25 equals 2)
Got that?
Oracle's certainly not the only software house jumping through hoops to retrofit traditional (and lucrative) pricing programs to a world of multicores, virtualization, commoditization, open source and software-as-a-service. At some point, the industry will arrive at a more rational basis for charging (or not charging) for software, one that truly reflects customers' actual usage and value received. But as the old model goes through its death throes, expect to see more such contortions.
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Comments
Nick, not too simple, please...I help corporations negotiate against these vendors and navigate the pricing...
it is pretty sad to see all kinds of user, processor, "engine" based pricing, followed by a whopping discount of sometimes 85%....makes the yield management of airline pricing look simple..and guess what price leadership has gone to the Southwests and the Jetblues with much simpler (and cheaper) fare structures...
Posted by: Vinnie Mirchandani at December 20, 2005 12:00 AM
Nick, this is the way an ideal software negotiation happens courtesy of Police( and Sting)
http://dealarchitect.typepad.com/deal_architect/2005/12/wrapped_around_.html
Posted by: vinnie mirchandani at December 20, 2005 07:31 AM
But would simpler pricing also mean cheaper pricing in the case of these high-end business solutions? It would be interesting to see some debate over that issue.
Posted by: Filip at December 20, 2005 09:38 AM
Nick, no need to post this but you may find material in this Oracle/SAP spat I have written about below...
http://dealarchitect.typepad.com/deal_architect/2005/12/the_pot_and_the.html
Posted by: Vinnie Mirchandani at December 21, 2005 11:22 PM
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