Government negotiates Oracle discount

The UK government has signed a three-year discount deal with Oracle, following a similar deal it signed with Microsoft last year.

The Office of Government Commerce (OGC) has secured lower rates for Oracle's Secure Infrastructure Bundle, which includes 9i database and application server software.

The OGC estimates that departments will realise savings of 11 per cent on the Oracle software.

"As we did with Microsoft, this shows the deals we can get when we buy as one purchaser," said an OGC spokesman.

In addition to cost savings, government departments also get to see the price they are paying for software. This reflects a desire for openness in pricing, say market watchers.

"The market is moving towards a McDonald's menu approach: each component is clearly priced and discounts given on bundles. Like a Happy Meal," said Philip Carnelley, research director at analyst firm Ovum.

Seeing software prices allows customers to better understand where budget is being spent, and whether it represents value for money, according to Jacqueline Woods, head of global pricing strategy at Oracle.

As well as ensuring that different public sector bodies are paying the same for software, the agreement enables them to see what they are paying for software, and what they are paying for integration.

While the government accepts that integrators are entitled to make a "fair and reasonable" profit, it wants to protect against the risks of integrators making "a huge mark-up" when negotiating deals, said the OGC spokesman.

Carnelley warned that configuration costs can be as much as 10 times the price paid for software licenses.

But systems integrators are not entirely responsible for confusion over where money is spent, explained Iain Campbell, public sector manager at Oracle UK.

As the software market matures, and businesses reduce the amount of bespoke development, the pricing for deals is becoming "less of a black art", he said.

The 'memorandum of understanding' is similar to one signed between the OGC and Microsoft. It covers central and local government agencies, as well as the police and all education authorities.

Campbell said that talks are ongoing to see whether a similar agreement can be reached for Oracle's e-business software.