Sun is also providing the source code for its Jini technology free via its Web site. Unveiled in January 1999, Jini provides a framework for connecting a variety of devices-such as notebooks, printers, and disk drives-in a network regardless of the software or hardware platform.

Businesses are making open-source software a standard part of their IT portfolios. In addition to lower prices, "we can get better products delivered more quickly from open sources," says David Pennington, chief systems engineer at Atlanta retailer Home Depot Inc., which is using Java to write nearly all its applications.

Some IT managers are taking a more cautious approach to freeware. "Any time you're looking at free software, you have to determine whether you can afford it," says Fluor's Benner. "You have to look at the life-cycle costs. If the software is bug-free and well-documented and supported, then you can afford free software."

ERP To remain profitable as well as to target smaller customers, some vendors of enterprise resource planning applications are experimenting with different pricing schemes, including usage-based pricing, adding discounts, and coming up with creative pricing packages such as yearly licensing.

"Midsize companies can't pay the same as large companies, so ERP vendors are discounting their traditional product offerings," says Melendez of Glomark. Often these discounts are made quietly. "They're doing this in practice, repackaging so that they can discount, but they're not announcing it."

SAP America has made changes to its pricing structure over the last year to accommodate greater demand for E-business. "With the advent of the Internet, we realized that we needed to be more of a solutions provider and wanted a pricing model that reflected this," says Joseph LaRosa, manager of pricing at SAP. "Our old pricing paradigm was product-centric."

Under the older, component pricing model, SAP customers would license software on a product-by-product basis. With the new model, customers can license all of SAP's products using a role-based approach, allowing them to more easily select which components they wish to use. The new model simplifies SAP's overall pricing scheme; whereas it used to license products separately, it now licenses all products under the mySAP.com umbrella.

DATABASE MANAGEMENT Changes are afoot in database licensing and pricing practices as well. Oracle last May put in place a new pricing option for its database and application-server software based on "power units." Under the plan, the number of users accessing the software is not regulated; pricing is determined by multiplying the number of CPUs per server by the processors' power. For instance, a company buying Oracle8i for a two-processor server that uses 400 MHz processors would have a power-unit rating of 800. Oracle8i is priced at $15 per power unit, resulting in a final price of $12,000. Oracle, in comparison, charges $160 per named user for Oracle8i.

In late December, Oracle revealed it was cutting prices on Oracle8i Standard Edition and Enterprise Edition database software, but at the same time reducing and standardizing the discounts it has negotiated with customers in the past. While cutting discounts will negate some of the price cut's effect, CEO Larry Ellison says the "effective result" will be a 25% to 30% price reduction. Oracle is doing this to make its products more attractive and affordable for smaller companies, to simplify its selling process, and to reduce sales expenses.

Vendors in the business intelligence and online analytical processing business say they've been expecting increased price competition for years, but it hasn't come. Business intelligence is becoming a more important part of running an E-business, and vendors predict this isn't the time for customers to move pricing higher on their list of selection criteria.

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Illustration by Catherine Parr