Oracle's High-Priced Database Strategy Under The Microscope

The company warned two weeks ago that it would miss its third-quarter projections by a penny per share, citing slow sales in Asia. The company now expects to earn 9 cents per share for the quarter ended Feb. 28 vs. 10 cents per share previously expected.

Aside from stagnant IT purchasing, Oracle faces strong price pressure from IBM's DB2 and Microsoft's SQL Server databases.

An eight-CPU version for Oracle9i costs 53 percent more, or $183,000 more, than IBM's DB2 and a whopping 75 percent more, or $480,008 more, than SQL Server, according to Software Spectrum.

While the price disparity was "somewhat surprising," software cost "is just the beginning of the story," said Roger King, president of product services at the Garland, Texas-based reseller. "If you take the whole cost of computing, Oracle is probably closer" in cost to its rivals, he said.

"In a down economy, everyone must take a look at price in relation to purchase criteria. In the database market, the top criteria continue to play to Oracle's strengths, security, reliability and performance," said Jacqueline Woods, vice president of global practices and pricing at Oracle.

Others say price is becoming more critical. Oracle's relative expense is "very much a reality, not a perception. . . . The company bundles a lot more into the product, markets it on features and functionality, and jacks up the price," said Bud Brasier, CEO of Emerging Technology Solutions, Franktown, Colo.

Vendors offer so many different options that making an apples-to-apples comparison is nearly impossible, said Chris Koontz, a database consultant in Winston-Salem, N.C. "You need to have a Ph.D to figure out these prices."

Oracle Chairman and CEO Larry Ellison has taken a risky gamble in believing that corporations will continue to view Oracle as a database worthy of a premium price tag, especially since many customers are weary of Oracle's high-pressure sales tactics, industry observers said.

Oracle has reportedly been sending audit teams into some large and midsize customer sites to test license compliance and make sure customers are paying the vendor all the revenue it is due, sources said.

That would be well and good if there were no options to Oracle's database, observers said.

But "Microsoft SQL Server is now a viable alternative and despite IBM's stumbling around with different code bases, they have a viable option. This is not a one-horse race," said Betsy Burton, an analyst at Gartner.

An Oracle spokeswoman said it is standard policy for vendors to audit software usage. Furthermore, she said, the company runs standard volume discounts and promotions.