Interview with Jacqueline Woods, Vice President of Global Pricing and Licensing Strategy, Oracle Corporation: Multi-core Processors - Impact on Oracle Processor Licensing

Q: How does Oracle price its software?
Jacqueline Woods: For its technology products, Oracle has two primary pricing models. Customers can choose between Named User Plus and Per Processor pricing models based on their specific needs. Named User Plus is ideal for organizations with discrete and countable user populations. For uncountable populations, processor licensing is required. The Processor pricing model is based on the number of processors a customer has installed and the number of those processors that the customer has operating. This model is easily measured, a fact that makes costs transparent for our customers.

In the past, Oracle has used other means to price software, but we've found that our customers are most satisfied when they can easily identify and predict what they're licensing fees will be. Oracle is committed to providing customers with simple, flexible and transparent pricing models. We have one global price list, which is available to the public via our Web site.

Q: Will Oracle adjust its pricing based on advancements in hardware technology, such as dual-core processors?
JW: A: No, we have no plans to change our processor licensing policies. We charge per processor, which is the same as per core. For several years, IBM has employed dual-core chip technology for their hardware. Today, all their machines are based on dual-core or multi-core chips. Several other hardware vendors are also pushing multi-core chips in which more than one core is on one chip. Sun, for example, recently released a dual-core UltraSparc chip. Both Intel and Advanced Micro Devices have recently announced that they will also introduce dual-core chips next year.

Some of the hardware vendors are suggesting software makers like Oracle should retool their licensing models and charge per chip instead of charging per processor. Microsoft recently announced they would charge per chip and not per processor as Oracle and IBM both do today.

Q: Why wouldn't Oracle and other software makers change their pricing models?
JW: Let me use an analogy. If you go to a restaurant and order two apples, it doesn't matter how the server delivers the apples to you. The apples could come on one plate or two plates. Either way, you will consume two apples. Processor licensing works the same way. Customers pay by the number of processors they use, whether they are delivered on one chip or two.

Q: Does that mean that Oracle's software prices will increase for customers using dual-core processors?
JW : No. Oracle's software pricing remains consistent. It has not changed. Whether customers use dual-core chips (two processors on a single chip) or two single core chips, they still need two Oracle processor licenses. Simply put, if customers require more processing power, regardless of its form, they also will need to increase their software licenses. Customers are required to pay for the total number of cores they are using.

For the purpose of managing their processor licenses, customers can also partition their servers and run Oracle on a subset of the processors within a server. This facilitates the customer's ability to efficiently manage their software licenses and only pay for those that are employed for the purpose of running Oracle's software.

Q: Why not change the price as hardware prices change?
JW: That's the key point. Hardware vendors aren't reducing their costs as they offer dual-core chips. Instead, they are pushing customers to push software vendors to cut software costs through a pricing model change. As mentioned previously, as soon as you move away from what we can count or what we can measure, it's difficult for customers to determine what their license entitlements are or what their license entitlements should be.

Q: Why haven't other models been as successful?
JW: Essentially, customers want predictability, especially when it comes to software costs. Time and again, when customers move into variable pricing, the measurement process and the time it consumes often become more expensive for customers in terms of time and money.

Q: Does Oracle charge for multithreading?
JW: No, Oracle does not charge for multithreading. A processor, also known as a core, is a set of one or more processor threads. The processor thread tracks execution of a software program thread. As a result, Oracle does not charge per number of threads.

Q: How does Oracle see licensing models evolving over the next couple of years?
JW: Software licensing models evolve as IT environments continue to evolve. Driven by the propagation of n-tier architectures, our current licensing models grew from concurrent user, named user single server and named user multi-server licensing models to processor and named user plus models. As the software landscape continues to transform, we anticipate that software licensing will continue to transform along with it.

In the near term, we expect to augment our existing pricing models with employee-based licensing, which essentially is an enterprise model based on the size of a company. Again, customers are looking for predictability and low costs and we are committed to providing them with pricing models that meet their needs.