Oracle Price Hikes May Be Part of Procurement Game

Oracle recently increased the costs of a few database products, leading Microsoft to address the issue in a corporate blog post affirming the value of SQL Server 2008.

However, Oracle's move may be a play to appeal to procurement managers, in order to build a greater degree of customer loyalty.

Ray Wang, an analyst with Forrester Research, found that Oracle had bumped up prices for three products, namely the processor licenses for its diagnostic, tuning and database configuration management packs. Those prices have risen 40 percent from the fourth quarter of 2008, to $5,000 per license.

"Only three products on their list went up in price," Wang said in an interview with eWEEK. "Oracle has a public price list, but nobody ever pays list price."

Indeed, Wang suggested that Oracle's targeted price increases may have everything to do with the needs of procurement managers.

"Oracle is responding to what procurement managers are saying about how their bonuses are based on how much of a discount they receive," Wang said. "Not all procurement managers are doing that, but we've been hearing a lot of that in the conversations we've been having. We've also been hearing from other vendors in terms of the issue, where the procurement managers are saying they're not getting high enough of a bid."

Under this reasoning, if a procurement manager can show that he or she has worked Oracle or another vendor down from a higher price point to a highly discounted one, that can lead to the salary bumps and bonuses that come with being seen as a star employee—and also helps him or her be seen by the vendor as a go-to provider.

Nonetheless, Microsoft has been responding to the price raises on Oracle's handful of products by promoting its own database offerings.

"Microsoft has not raised prices of SQL Server 2008—not on the core database, not on options," claimed a post on the official Microsoft SQL Server News Blog. "SQL Server 2008 includes a broad array of rich functionality to address key business needs, including business intelligence applications, server consolidation and compliance."

In Wang's analysis, Microsoft has generally been keeping prices for its database products relatively level. "Microsoft's been good at holding prices, so they're coming in at a lower entry point," Wang said. "The question [for IT administrators and procurement managers] then becomes, Are you getting the right levels of performance? Sometimes you're overpowered, and sometimes you're underpowered."

Oracle's public presentation of its price list opens it to competitors' attacks. Companies such as Microsoft, however, deal with indirect partners, meaning the partners set the pricing, which thus remains more opaque.

The Oracle price hikes come amid a wave of new products tied to the release of Oracle Fusion Middleware 11g, which was launched July 1 in a high-profile presentation at the Andrew W. Mellon Auditorium in downtown Washington.

Fusion Middleware 11g seeks to present a prefabricated environment, based on open standards, which IT administrators can patch and upgrade as a cohesive whole instead of attempting to cobble together a comprehensive infrastructure solution. Oracle's intention is to reduce the time spent on maintenance due to a fragmented environment.