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Kas Thomas

Oracle's new plan to save you money

23-Jun-2008

Tags: Document Management (ECM), Web Content and Experience Management, Building Business Case, Marketplace at Large, Selecting Technology, Vendor Viability & Financials

There's something vaguely Orwellian, at times, about the language that turns up in quarterly and annual reports (the kind U.S. public corporations are required to file with the Security and Exchange Commission). Remember the classic slogans from Orwell's 1984? War is peace. Freedom is slavery. Ignorance is strength.

Perhaps we should now add, "Higher prices mean lower cost of ownership."

I'm reading a well-known software company's quarterly report dated April 1, 2008, wherein the following rather noble-sounding statements are made:

"We have focused on lowering the total cost of ownership of our software products by improving integration, decreasing installation times, lowering administration costs and improving the ease of use. Reducing the total cost of ownership of our products provides our customers with a higher return on their investment, which we believe will create more demand and provide us with a competitive advantage."

This comes from a company that many consider to be a master of extortionate pricing. And indeed, what makes the foregoing passage so Orwellian is that the company recently increased its prices across-the-board by an average of 15 percent. I'm talking, of course, about Oracle.

Prior to last week, Universal Content Management 10gR3 sold for $100K (plus $22K per year for maintenance and support). The same software is now $115K (plus $25,300/yr for maintenance and support). Note how the higher license engine pulls a bigger support caboose.

Oracle's BPEL Process Manager product was $50K before the price increase. It is now $60K.

The Event Driven Architecture Suite has gone from $60K to $70K.

Fusion Middleware adaptors that were $30K are now $34.5.

In fairness, many (perhaps most) of the products on Oracle's price list have acquired new features over the past year, and so one could argue that the price increases merely translate to "you get what you pay for."

On the other hand, software is an extraordinarily competitive business. Enterprise customers have ever-higher expectations as to feature richness, quality, and adherence to industry standards. In fact, some people (i.e., users of open-source software) expect to pay nothing for the bits and bytes, and only a modest amount for support.

Oracle isn't going in the pay-just-for-support direction, of course. New software licenses account for a third of Oracle's business. It intends to grow that side of the business, organically as well as through acquisitions -- including acquisitions of direct competitors. And guess who gets to foot the bill?

But don't worry. Remember, your total cost of ownership is going down. Well, at least it was going down, until your vendor recaptured the savings with higher license fees...