Oracle pulls plug on 9i power unit pricing

Oracle has some good news for its customers - it's only going to charge them twice as much to use its all-singing 9i database software than its rivals do for competing products.

The company has scrapped the system of calculating database software licence fees based on the power of the hardware running it, called the universal power unit (UPU) model.

A power unit was defined as 1Mhz of power in an Intel-compatible, or 0.67Mhz in a Risc processor, in any computer on which the software is operating.

The result was huge licence fees - more than $1m more expensive than rivals for some Sun-based users - and a significant number of angry customers.

At the 9i launch, Oracle chief executive Larry Ellison seemed to acknowledge that the power unit model had been a mistake. Now the company has changed to a flat-rate fee per processor model, as IBM and Microsoft do for their database software.

The new fees are $15,000 per processor for the Standard edition and $40,000 per processor for the Enterprise edition. Existing customers will be told next week how to convert their licences to the new model.

Since the power unit model was introduced, year on year sales growth slowed from around 30 per cent to just 6 per cent, and Oracle lost enough market share for analysts to warn that its position as market leader was in jeopardy.

Commenting on the 9i pricing, Ellison said: "This is a price reduction, and it allows us to sell more software. I think we will gain a huge amount of market share."

Analysts said the move was necessary to jump start sales, as price has been the number one competitive pressure for Oracle and the power unit model had alienated customers.

But 9i is still far from cheap, as Ellison admitted. "We're twice as expensive as IBM. However, we have a lot more stuff and IBM charges separately for that stuff."

On performance, most commentators believe Oracle has an advantage. 9i includes real application clustering, based on cache fusion technology, which Oracle claims will allow limitless scalability with no drop in performance.

Oracle is hopeful that around 70 per cent of 8i users will upgrade.