Will treat each core as three-quarters of a chip when calculating license costs, bringing it more in line with rivals.
The company now treats each core on a multicore processor as three-quarters of a chip when calculating license costs for its database and application server products, according to the latest licensing terms posted on its Oracle Store Web site.
The licensing change, which had been anticipated for months, will please customers, according to analysts and partners. But Oracle is still charging a premium compared with the policies from database rivals IBM and Microsoft.
Until recently, Oracle's policy was to treat each core as a separate processor, a stance that was at odds with most other large software providers' policies.
Major infrastructure software companies, including Microsoft, Red Hat and Novell, have a policy that treats a multicore chip as a single processor for calculating license fees.
In April, IBM shifted its policy and now treats dual-core chips from Advanced Micro Devices and Intel as a single processor. But it continues to treat each core as a processor for IBM's own Power chips.
After IBM, Oracle remained the last holdout among large software companies to stick to a policy of treating each core as a processor, said Julie Giera, an analyst at Forrester Research.
"Oracle had to (change) competitively," Giera said. "They've been taking advantage of customers, frankly, by charging full price for these cores even though in dual and multicore chips you're not getting full capacity."
Giera said the change will likely soothe some irritation and dissatisfaction among Oracle customers.
Multicore processors pack more than one processing unit, or core, on a piece of silicon. The technique boosts performance of a machine, while keeping the heat generation down, although two cores do not double the performance.
Dual-core systems are expected to become more common since Intel and AMD released their first dual-core chips earlier this year. Server chips with several cores are already on the market from the likes of IBM and Sun Microsystems.
Server software products historically have used a per-processor license fee, a method that's being challenged by the emergence of new technologies.
Traditional per-processor pricing means a customer could pay substantially more when buying a database or application server to run on a server with multicore chips if each core is considered one processor.
Michael McDermott, chief operating officer of Cisco Inc., which resells Oracle software, called the change a "step in the right direction."
He said that the issue of dual-core pricing has come up with a client looking at a large installation of clustered Oracle databases. Oracle's discount would create a substantial savings from a licensing standpoint, McDermott said.
"When we heard about IBM's policy, we were thinking that Oracle would change too," he said. "Maybe they'll get more pressure to do like everyone else."
Oracle has faced some public criticism for its former policy.
At the Oracle OpenWorld customer conference last December, Sun CEO Scott McNealy took a few jabs at Oracle, predicting that the company would change its policy. McNealy referred to Sun's planned dual-core Opteron servers as a "big revenue opportunity for Oracle with their dual-core pricing."
Like Sun, chip manufacturers Intel and AMD have been vocal proponents of a "per socket" pricing, which would treat several cores as one processor.
Meanwhile, BEA Systems, like Oracle, has decided to charge a premium for its software that runs on dual-core servers. InBEA's case, the company charges a 25 premium for dual-core servers.
In the face of policy statements from several competitors, Oracle executives indicated over the past several months that they were re-evaluating their licensing model to take into account multicore chips.
In Oracle's new licensing plan, customers need to take the number of cores used in a server processor and multiply that by 0.75 and then round up to a whole number. For example, a multicore chip with 11 cores will be counted as 9 processors. (11 times 0.75 equals 8.25, which is rounded up to 9.)
In the case of Oracle's low-end databases--Oracle Standard Edition and Standard Edition One--the maximum number of processors will be counted as one to ensure that those customers have a discount with the new policy, which went into effect July 9.
Noel Yuhanna, a database analyst at Forrester Research, expects Oracle to revisit its pricing plan again in the near future.
"This could hurt their revenue if they take a stance of charging a premium for dual and multicore," Yuhanna said. "The (database) technologies from IBM, Microsoft and Oracle are very comparable, so it comes down to cost. Cost is an important factor."
In a conference call on Friday, Jacqueline Woods, Oracle's vice president of pricing and licensing, said that Oracle concluded that customers get "incremental value" in going with dual-core servers. Customers will get between 1.5 and 1.75 times improvement in performance by going with a dual-core server.
"We think that this is the right pricing for that environment," Woods said.
Woods also noted that Oracle's pricing scheme is consistent across all hardware platforms, while IBM makes an exception on how it counts cores for its own Power-based servers.
Giera said that another point muddying the license picture is virtualization, where several operating systems can run on a single processor.
Virtualization software company VMware, a subsidiary of EMC, this month intends to announce that dual-core processors will be treated as a single chip when calculating license cost for its entire line.
Woods said that Oracle has started using a per-employee licensing option for some customers. This approach, which makes pricing independent of the hardware running applications, will help smooth over some of the complexities that virtualization introduces, she said.
"I do think that you will see a trend moving back to employee or user-based licensing. I think people will be doing that because that may be easier," Woods said.
But even as vendors state their new policies, Giera said that corporate customers need to look carefully at the details of different vendors' terms.
"Everyone's got a slightly different twist on how you have to pay for virtualization and multicore," she said. "You need to understand the implications before you do any financial modeling."