In an effort to expand sales in low-end markets and trim its sales costs, Oracle will begin charging lower, fixed prices for its Oracle8i database software. At the same time, the company will also standardize--and decrease--the discounts it offers customers, which will offset the impact of the reduced prices. CEO Larry Ellison says the changes, effective Monday, will reduce the price of Oracle's database products by 25% to 30%.
Oracle will cut the price of Oracle8i Standard Edition from $25 per power unit to $15 per power unit and the price of Oracle8i Enterprise Edition from $200 per power unit to $100 per power unit. Under a pricing model created earlier this year, Oracle priced its database software according to a "power unit" formula calculated by multiplying the number of CPUs per server by the processors' power. An Oracle spokeswoman says the new pricing policies would also apply to Oracle's applications, but she could provide no further details.
Oracle, however, is not changing prices under its named-user pricing model, which charges $160 and $600 per user for Oracle8i Standard and Enterprise editions, respectively. Oracle will also continue to negotiate custom deals for contracts valued at more than $500,000, although Ellison says that threshold might be increased to $1 million in 2000.
The new policy seeks to limit the number of custom deals Oracle negotiates for its software, a practice that annoyed customers and increased the company's selling expenses. "Oracle's system was seriously flawed," says Meta Group analyst Anthony Bradley. "It's contracts were like snowflakes: No two were alike. The sales force spent 75% to 80% of its time negotiating, not selling."
The move is also designed to encourage more customers to make their database purchases through Oracle's online Oracle Store. "We have to make the price more reasonable," Ellison says. "We're doing that by putting all of our products on the Web store, lowering prices, and establishing a standard discount schedule based on the volume of business (customers) do with us. So all of these contracts will not be negotiated one-off. You can't be an E-business and do business that way."