Oracle announced that next week it will post online a comprehensive guide that will answer “90 percent of the questions customers usually have about our prices,” Leslie Rubin, director for global pricing and licensing communications, told CRM Buyer Magazine.
The release of the guide does not represent a new direction in pricing, she emphasized. “It’s basically to provide clarification of the policies. More than ever before, people are scrutinizing how they are purchasing software in order to make better buying decisions.”
Analysts say publishing the guide is a positive step for the software industry, where prices can be difficult to compare on a module-to-module basis.
“It’s a great idea, and Oracle will need to do this more and more often to prove they are competitive at a price/performance level with potential clients outside of their customer base,” Louis Columbus, senior analyst with AMR Research, told CRM Buyer. “Clearly, on the sell side — and specifically, in CRM — Oracle’s ability to attract entirely new customers hinges on the price/performance and ROI (return on investment) they deliver.”
New Focus on Pricing
Pricing will, no doubt, continue to be a competitive differentiator, given the current economic environment and the largely flat sales in the CRM industry this year and last. Earlier this month, for example, FrontRange announced a 20 percent rebate incentive for Canadian customers purchasing its GoldMine sales force automation product.
Aberdeen Group research director Karen Smith told CRM Buyer that other vendors are likely to follow suit. “To be successful, companies are going to have to come up with more creative pricing strategies.”
Oracle has been tinkering with its pricing strategies, in fact. Early this year, it introduced a new pricing model that it said would save many companies as much as 75 percent per application user. Pricing for its E-Business Suite 11i was set at a minimum entry fee of US$250,000, with individual professional user licenses priced at $4,000 – versus $12,500 for individual modules.
At the time, Forrester Research noted that these reductions would make Oracle’s offering competitive with J.D. Edwards, but would be unlikely to make a dent in SAP’s or PeopleSoft’s market share.
While discounts in the list price are always a welcome development, analysts warn that companies may well find that savings can still be elusive.
Module-to-module price comparisons are very difficult to make because of the way vendors are packaging applications, according to Lenny Riley, director of business services in AMR Research’s Contract Negotiating and Benchmark Practice, a separate service that negotiates with software vendors on behalf of clients.
Riley told CRM Buyer that in recent months, new and far more complicated pricing models have emerged that are based on everything from revenue, order lines, payroll records, cost of goods sold, total cost of goods sold, number of servers and value of transactions.
And this does not even take into account the terms and conditions, or maintenance clauses — not to mention the pricing for attendant implementation services, which can be three or four times the price of the license. Indeed, Gartner research director Jane Disbrow told CRM Buyer that these areas are where companies tend to lose the most money.