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Oracle plans alternative pricing for PeopleSoft apps

The move could mean lower prices for customers

By Joris Evers
January 20, 2005 12:00 PM ET

IDG News Service - Oracle Corp. is working on an alternative pricing model for its newly acquired PeopleSoft products, which could mean lower prices for PeopleSoft users.
The new pricing model is to be offered in addition to the existing PeopleSoft model and will be similar to the Oracle E-Business Suite pricing scheme, according to Jacqueline Woods, vice president for global pricing and licensing strategy at Oracle.
Oracle's E-Business Suite is priced per named user, and the company publishes pricing and licensing details on its Web site. By contrast, there are no published prices for PeopleSoft products. Instead, pricing is calculated per customer based on a set of variables including customer revenue, number of employees and industry, in a system PeopleSoft called value-based pricing.
"It is a black box," Woods said of PeopleSoft's license price calculator in an interview. "The only thing that customers liked about that is that, in the end, you get a price."
In the short term, PeopleSoft's pricing will be the only option for customers. But keeping with Oracle's policy of offering clear prices, Woods is working to simplify the PeopleSoft pricing model.
"I am working to rationalize it and am trying to map what PeopleSoft was doing to what we do so we can provide customers with an alternative," she said. PeopleSoft users who want to stick with the current pricing scheme can do so. "We are not upsetting the apple cart," she said.
There is no due date for the additional pricing option. The PeopleSoft calculator was proprietary, and Oracle got access to it only a few weeks ago, according to Woods. "We are just now getting under the covers," she said.
An Oracle-style pricing scheme for the PeopleSoft products not only gets Oracle on the path to a single pricing model, but it may also result in lower prices for current and new PeopleSoft users, said Joshua Greenbaum, a principal at Enterprise Applications Consulting in Berkeley, Calif.
"PeopleSoft pricing is very complicated," he said. "It is based in part on a company's revenue, which meant that as a company grows, they pay more. The licensing model punishes customers for growing and being more productive. If Jacqueline [Woods] does a good job, customers will get a better deal from Oracle."

A new licensing scheme for PeopleSoft products could benefit those buying new licenses as well as existing customers, according to Greenbaum. "There should be a benefit for everybody. One effect could be to actually lower licensing costs for some PeopleSoft customers who are on a fast growth path."
There is the potential for lower costs, but it will

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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