Oracle users priced out by licence hike

Oracle has come under fire from customers, who claim that it is asking 'impossible' licence fees for its 8i database software to underpin web applications.

The criticisms follow a change in Oracle's licensing structure last year from charging per concurrent user to charging based on the power of the hardware running the software.

The changes were made after the increase of internet-connected databases made it difficult to calculate the number of end users.

However, some customers using 8i for web applications have experienced licence price hikes of up to 70 per cent, because of the increased hardware power they have needed to install to meet the growing number of web users.

"In general, I feel Oracle has outstanding products. They are just making it impossible for me to be able to afford them," said Len Schulte, information systems integrator at Maritz, a heavy user of Oracle and other database software.

"The big hit was for new web-based applications. An example, which I feel is nothing short of ludicrous, was on a Sun /220. The purchase price for this hardware for this application was around $30,000. The 'list' price to deploy Oracle on that same box was $135,000 - and then you must add annual support."

Oracle now calculates licence costs for enterprise versions of its database software based on the power of the hardware running it, called the universal power unit (UPU) model. The company defines a power unit as 1Mhz of power in an Intel-compatible or 0.67Mhz in a Risc processor in any computer on which the software is operating.

Adrian Challinor, technical consultant at UK telco Energis, said: "We came across some rather shocking prices from Oracle. We found [IBM's] DB2 to be substantially cheaper against equivalent Oracle licences. Despite being an Oracle shop, we will be converting all our web-facing applications from Oracle to DB2. It's financial suicide not to."

Rising costs
Maria Reeve, an analyst at Gartner, said: "Clients, and these are Global 1000 companies, are saying that they are paying much more under the power unit model than previously - that's up to 70 per cent more in some cases."

Reeve said many of her clients are considering switching to rival products such as IBM's DB2, while analysts at the Meta Group have actually recommended Oracle users switch to DB2 if Oracle refuses to lower prices.

"At our June software asset management conference in New Orleans we asked users to raise their hands if they were happy with the new model - one hand was raised. Many of our clients have committed significant resources to technical evaluations of rival products," said Reeve.

"Oracle is taking advantage of its position. It has subtly managed the definitions in the licensing terms to extract more revenue. Our clients say that every time they upgrade they end up paying more, but many feel they have little alternative but to use Oracle."

The 'savings'
Ronan Miles, chairman of the UK Oracle Users Group, which last year lobbied hard for the previous licensing system to be changed after its members had complained over costs, said Oracle's power unit licence models had created savings as well as higher costs.

"Yes, some members have complained that the movement to UPU has resulted in increased charges. I have heard of over 250 per cent being quoted by some in the US. However, I have also heard that some have made noticeable savings," he said.

"It would appear that the move to UPU has resulted in a saving for those with 'technology' licences and a cost to those with 'applications' licences."

Gary Bloom, executive vice president of Oracle and widely believed to be the one being groomed for the chief executive job, said: "We have had a mixed reaction: some [customers] like it and I can see some others like the old model where they could negotiate.

"At the end of the fourth quarter our sales director in the US gets what he calls the Oracle Alumni calls. These are CEOs of startups - ex-Oracle people that call him up and ask for that extra per cent off. He keeps saying 'the price is the price'."

Maritz's Schulte concluded: "I hope Oracle never builds and sells cars, because if they do, not only will I have to deal with the initial purchase price, but I won't have any warranty unless I purchase that too.

"And once I drive off the forecourt, I'll probably have to pay them a penny for each mile I drive and I'll have to pay an additional penny every time I have a passenger in my car."

Additional reporting by Bryan Glick of Computing and Jo Ticehurst of vnunet.com