Industry Pushes Back On Oracle's Multicore Licensing Policies

Oracle, which charges software licensing fees per processor core rather than per processor as many of its competitors now do, is likely debating a move now and will certainly need to make changes at least by early 2006, industry executives from a variety of companies told CRN. Those executives said Oracle is hearing complaints from chip and server manufacturers, solution provider partners and end customers.

"Everyone is upset about it," said Joe Vaught, COO of solution provider PCPC.

In fact, Oracle pricing for dual-core blade servers has become such a sticking point for the Houston-based PCPC that Vaught has called a meeting for later this month with Oracle and PCPC's blade server partner IBM to discuss pricing options.

Oracle in July said it would charge .75 of its standard software license per core for multicore processors. With a list price of $40,000 for Oracle 10g Enterprise Edition, a software license for a four-way dual-core server would by priced at $240,000.

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That's a huge differential over the cost of a four-way dual-core server, typically priced at $20,000 to $30,000, not to mention a single processor dual-core server that would cost in the neighborhood of $5,000.

Oracle declined to comment for this story, beyond sending a short statement to CRN, which read in part: "As platforms change, and market opportunities arise, we continue to examine our pricing structure."

Several solution providers said in an era of increased server consolidation and low-cost hardware options, high Oracle per-core licensing prices can nix a sale.

In some cases, solution providers said they are offering alternative databases when dual-core pricing is an issue. But often Oracle's database is required because it functions as the data repository for another application.

"Customers are either delaying purchases if they are not committed or they are looking at some alternative product," said one solution provider that sells Oracle products. "I think this will impact the lower markets more than the enterprise because the enterprise is still willing to pay the big fees. But Oracle's licensing policies are going to start hacking away at the lower-level market share where it is trying to build a presence."

Though many in the industry saw Oracle's price changes in July as a "first step" toward a pricing plan that takes into account current industry trends, they insist another move is now necessary.

AMD shipped its first dual-core processors in April, with Intel following in November. But dual-core will make a bigger impact early next year. That's when market leader Intel is set to deliver its first platform specifically designed for dual-core.

As a result, big volumes for dual-core processors are expected to ramp in 2006, and both chip makers have said the majority of processors sold by the end of the 2006 will be dual-core. Additionally, AMD will likely try to phase out its single core processors quickly to maintain a technology edge over Intel. Both companies also have pegged the end of 2006 for the launch of more powerful quad-core processors.

"When you get to multicore, how you price out the software becomes the sticking point when adding apps and migrating apps," said John Sheaffer, president and CEO of Sysix Technologies, a Downers Grove, Ill., solution provider.

Sun Microsystems apparently has made some headway on the pricing dilemma. Earlier this month, at a Sun press conference, Oracle President Charles Phillips said Oracle licenses for servers based on Sun's new eight-core T1 processors would be priced at .25 per core – or the cost of two full Oracle licenses for each eight-core processor.

But there is confusion in the industry about the duration of that offer. Oracle has since positioned the offer as a "promotion" for customers that want to try the new T1 servers.

Though at least one Sun executive initially indicated that the pricing Oracle announced was a permanent change, Sun has since backed away from that assertion.

Oracle declined to provide additional information about the new pricing, but offered this explanation as part of the statement it sent to CRN in response to this story: "For customers who want to try the new Sun Fire systems, Oracle is offering a special price promotion. We have various pricing promotions across platforms."

When Sun initially unveiled its T1 processor line, a number of Sun partners expressed concern about Oracle pricing on a processor with eight cores. They noted that even $30,000 per core -- three-quarters of the full license cost -- for an eight core processor would be unacceptable to clients. A server based on an eight-core processor does not offer the same performance benefits of eight single-core servers, so customers can not expect to pay a license fee as if they are buying a handful of single-core servers. Prices for new Sun servers cap at about $25,000.

"This is just a promotion, but if they were to move it across the board, that would be a huge difference," said a sales executive for one Oracle partner, who asked to remain anonymous. The partner said she believed that Sun was underwriting the promotion. A Sun spokesman declined to comment on the specifics but said that both Sun and Oracle are participating in the promotion and both sides are engaged to deliver the software on systems to the customer.

Ron Zapar, CEO of Re-Quest, a Chicago-area Oracle VAR, said Oracle's current cost model for dual-core processors is trying to match the horsepower of the processor to the price of the license. "If you are able to support 1.5 more Oracle processing on these chips, Oracle is entitled to 1.5 times the licensing cost," he said. "Oracle has always had this philosophy."

The question on everyone's mind these days, is how much longer can Oracle continue to hold on to its partners with that point of view. Microsoft in late 2004 said it would charge for SQL Server licenses by the processor, not by that processor's component cores. In April, IBM followed suit, saying that for x86 multicore chips and lower end PowerOpen chips, it would likewise charge by the processor, not core. For higher-end Power4, Power4+ and Power5 CPUs, however, IBM said it would charge for "two processors worth of performance."

Now, all eyes are on Oracle.

BARBARA DARROW contributed to this story