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Oracle cuts, standardizes database prices

The firm slashes prices on its flagship database software to increase its customer base and distance itself from competitors IBM and Microsoft.

Accelerating its e-commerce push, Oracle has slashed prices on its flagship database software to increase its customer base and distance itself from competitors IBM and Microsoft.

Oracle customers until now have had to negotiate the best deal on Oracle's software, since the company did not adhere to published prices. Today the company initiated a uniform pricing plan for database purchases under $500,000.

The database giant said it has cut the price of its Oracle 8i enterprise edition by 50 percent, from $200 to $100 per power unit. A "power unit" is Oracle's method for determining the size and power of server processors. The Oracle 8i standard edition pricing has dropped 40 percent, from $25 to $15 per power unit. The new prices will be available through Oracle's Web store on Monday.

Because customers previously received discounts in their deals, Oracle chief executive Larry Ellison said the new uniform prices will actually represent discounts closer to 25 to 30 percent, however.

"It's a combination of two things: lowering the list price and lowering discounts together," he said in a press conference today.

Ellison said the company wanted to simplify the buying process and cut prices to attract smaller businesses that couldn't afford the technology before. Oracle expects to up profits by increasing its customer base, he said.

"Customers tell us sometimes that we are difficult to do business with," Ellison said. "We are lowering prices substantially to enlarge the overall size of the database market itself."

Ellison said prices for larger sales won't be affected. Those deals will continue to be negotiated, he said.

Analyst Carl Olofson at International Data Corp. said today's move helps Oracle better compete against database rival IBM, which negotiates pricing. Microsoft, in comparison, uses published prices as Oracle will now do.

"The goal [for Oracle] is to make it easier [for customers] to work with Oracle," Olofson said. "They are trying to get as many into the fold as possible to make their user base as large as possible"

Oracle's strategy is a significant change because all database deals with Oracle were negotiable with no uniform prices before. "It really came down to how clever you were in negotiating," Olofson said.

He said the price decrease shouldn't affect Oracle's overall profits.

"The decrease in price--in terms of what Oracle gets out of the deal--does not go down much," he said. "If you consider what Oracle has discounted in the past, Oracle probably won't lose anything by using published prices."

For the past year, Oracle has targeted its 8i database as an all-in-one Internet deployment system. Its goal is to compete against Microsoft's Windows NT and forthcoming Windows 2000 operating system by offering a complete software "platform" from database software through business applications, which do not require Microsoft software.

Oracle's plan is "turning Oracle into a mass market platform for Internet computing to make sure Windows 2000 doesn't get a foothold," Ellison said.

Oracle is trying to free itself from relying on core Windows functions, such as the current NT file system. Oracle's delayed but forthcoming Internet File System will store and manage Web pages as well as Windows application files.

"We want every user to build Web sites on top of Oracle, every Web site out there?," he said. "Most of these Web sites don't have databases built in. We want more data in the database. All your email?Web sites?all your files should be in a database. We think there's a huge opportunity to go after the mass market and increase our volumes."

News.com's Mike Ricciuti contributed to this report.