Last week, Oracle quietly posted an updated price list for its database and middleware products on its corporate web site. As a comparison of the updated list with last year’s list reveals, most prices rose by between 15 and 20 percent. While Oracle did reduce prices on a handful of products, the widespread price increases could motivate some JD Edwards customers to rethink their software procurement plans.
The price increases apply to nearly all database and middleware categories in Oracle’s growing product portfolio. That includes the vendor’s flagship Database Enterprise Edition, which now costs $47,500 for a processor license versus $40,000 two weeks ago. That’s almost a 19 percent increase. Oracle also boosted prices on most of its business intelligence products. For instance, Oracle BI Server Enterprise Edition now costs $51,800 per processor, a 15 percent increase.
Interestingly, Oracle boosted prices on selected BEA products even as it is welcoming BEA users into its customer fold. For example, processor licenses for WebLogic Server Enterprise Edition jumped a surprising 47 percent to $25,000. However, WebLogic Server Standard Edition remained at $10,000 per processor.
By the way, Oracle increased support contract prices in lock step with list prices. If a product’s license costs rose by 15 percent, for instance, its support contract grew at the same level.
Oracle is not alone among enterprise software vendors when it comes to recent price increases. Earlier this month, SAP boosted annual support contracts for new customers to 22 percent of its product prices, the same percentage that Oracle and many other firms use. By contrast, the German vendor charges 17 percent to existing customers for standard support contracts. That effectively boosts maintenance prices for new customers by 29 percent. Over the next several years, we expect that SAP will find ways to drive many of its existing customers to the 22 percent level in an effort to improve margins.
When is Software Like a Barrel of Oil?
Despite what other vendors are doing, Oracle’s price boost is still a tough pill to swallow for most customers. While I am not going to defend the company for its decision, I will say that it has one big motivator to raise prices that SAP does not…the deteriorating exchange rate between the dollar and other currencies.
Allow me to explain. As a U.S.-based firm, Oracle prices all of its products in dollars and then adjusts those prices to local currencies. Over the last year, however, the dollar has plummeted almost 14 percent against the world’s major currencies. This means that international customers have been shelling out fewer Euros, Swiss Francs, and Canadian dollars (among others) for Oracle wares lately than they did just a few months ago. As a result, Oracle has been generating significantly less revenue and profit (in dollar terms) from international customers. So just like oil prices (which are also denominated in dollars), Oracle software prices are on the rise.
While Oracle may have a justifiable reason for raising prices, it is hard to ignore the magnitude of the increase and the fact that many U.S. firms in similar situations are not following suit. That testifies to a simple fact: unlike many other firms, Oracle is a product leader in a consolidating industry. This gives it (as well as IBM, Microsoft, and SAP) significant pricing power. Such power was much harder to find (much less wield) in the database and middleware markets just a few short years ago.
In short, Oracle’s latest price actions speak volumes about the changes taking place in the enterprise software market. So how will those actions affect JD Edwards customers and the decisions they make? I intend to post an article on that topic in the near future, so stay tuned.