Oracle lowers entry price for E-Business Suite

Oracle has once again altered the pricing terms for its E-Business application suite, this time with the hope of attracting more small and medium-size businesses (SMBs) to the product.

Effective Monday, the company eliminated a requirement that customers spend at least $250,000 to be eligible to purchase the suite. It has also reduced from 20 percent to 10 percent the minimum proportion of a company's employees that must be licensed to use the software, said Jacqueline Woods, Oracle vice president for global practices.

At the same time, however, Oracle "streamlined" the core suite by eliminating from it certain applications. In general the applications that have been eliminated are "self service" applications such as Self Service HR. Customers who purchase the suite from Monday and who want those applications must now license them separately, Woods said.

The changes are embodied in a new version of the suite released Monday called Oracle E-Business Suite 2003. The name change primarily reflects the new pricing and configuration; aside from that, the software is largely unchanged, Woods said.

Existing customers can continue to use the E-Business Suite and purchase additional modules under the terms of their existing contracts. As before, customers still have the option of buying individual applications and modules rather than the entire suite.

The changes are intended to make the suite more attractive to SMBs that may have been put off by the minimum entry requirements, particularly at a time when IT spending budgets are tight, Woods said. She also argued that the new pricing model is simpler to understand.

"We did what everybody wanted, which was to consolidate the suite down to the core set of products people really want for ERP and CRM, and the incremental functionality that's more specialized, like iSupplier Portal, that not everybody uses, you can buy separately," Woods said.

"It definitely is less products than the suite we were selling two days ago, but there's no change for people who had bought the suite already," she continued. "This is for customers who buy the suite going forward, and we think this is a more flexible option and should drive adoption. We think the threshold we had on the minimum number of users was more than the market could handle under the current economic conditions."

Analysts briefed on the changes Monday generally reacted favorably. The changes should help Oracle find new customers for its applications, particularly among customers who have ignored Oracle in the past because they considered its software too expensive, said Albert Pang, a research manager at IDC who is based in Mountain View, Calif. (IDC is a division of International Data Group, the parent of IDG News Service.)

In general, customers should see a "small decline" in the amount they pay for the suite under the new pricing system, he said.

John VanDecker, an analyst with Meta Group, agreed. Although the suite may include fewer applications than it did before, few businesses used all of those applications anyway, he said. "There's very few companies that use all that functionality. I think in most cases it's going to be cheaper."