December 8, 2004 5:20 PM PST

McNealy knocks Oracle for pricing plans

SAN FRANCISCO--Sun Microsystems Chief Executive Scott McNealy on Wednesday took some potshots at a major business partner, database giant Oracle, for its software pricing policy.

The brash McNealy twice criticized a significant detail of how Oracle sells its software based on how many processors a server has. And he didn't pick an out-of-the-way venue: he spoke to thousands at a keynote speech at Oracle's own OpenWorld conference here.

IBM, Sun, Intel, Advanced Micro Devices and others have begun a move to dual-core chips--designs with two processing engines on the same slice of silicon--and are headed down a path for even more cores. That has triggered a pricing debate for software companies: Should the charge be per chip socket or per processor core?

Oracle has selected the latter approach, meaning that a customer upgrading a Sun server using single-core UltraSparc III chips to dual-core UltraSparc IV chips will get a major Oracle price increase to go along with the performance increase.

McNealy said at the conference that Sun will incorporate dual-core Opteron processors in 2005, then jabbed, "which looks like a big revenue opportunity for Oracle with their dual-core pricing." And earlier, he crowed triumphantly when a Magic 8-ball told him Oracle would amend its dual-core policy.

Microsoft, Sun, Intel, AMD and Hewlett-Packard prefer per-socket pricing. That's not a surprise, since that would let hardware companies bill dual-core chips as a performance boost. Software companies, on the other hand, stand to lose revenue using the per-socket definition.

Oracle recently published its policy on dual-core licensing. "If you go to a restaurant and order two apples, it doesn't matter how the server delivers the apples to you," Jacqueline Woods, vice president of global pricing and licensing strategy, said at the site.

But that position isn't etched in stone.

"We need to go from fruit back to chips, and we'll address it," Chuck Rozwat, Oracle's executive vice president of server technology, said in a question-and-answer session with reporters Wednesday. "We are definitely going through a consideration of what our pricing model is."

One issue in the debate: Twice the processor cores doesn't necessarily mean twice the performance. AMD's dual-core Opteron shows a performance jump of 30 percent to 55 percent in lab tests over single-core models, the company said in October.

Another issue is that each processor core increasingly is able to process two or more instruction sequences called threads, a feature that makes one processor core look like more than one. Oracle doesn't charge extra for these multithreaded processors.

One issue for Oracle is that Microsoft has a competing database product, SQL Server, that's widely used at the same smaller companies Oracle is trying to woo in cooperation with HP and Dell

Microsoft's pricing strategy means it will have a cost advantage over Oracle when dual-core processors emerge that can run SQL Server. The strategy makes sense for Microsoft, which is trying to gain share, Rozwat said.

"For Microsoft it was a great thing to do," Rozwat said. "There are few companies that run data centers with SQL Server. For (Microsoft) it's an investment where they can try to get into data centers. For IBM and us, what we're doing now is evaluating it."

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$ales vs. Market Share?
What should drive these companies to review their pricing: $ or market? Choosing is an affordable corporate exercise. But so is buying cheap...
Posted by Mendz (519 comments )
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