June 12, 2000 3:20 PM PDT

Microsoft tweaks pricing for e-commerce software

Microsoft today announced a new pricing strategy for its e-commerce software to try to attract more Internet-based customers and to better compete against rivals Oracle and IBM.

Microsoft executives said most prices will actually stay the same. But some lower-end software will cost less, and other higher-end products will cost more.

Microsoft has historically charged companies per person who used the e-commerce software. Now Microsoft will charge based on the number of processors used to run the software.

Barry Goffe, a Microsoft group manager, said the old pricing plan didn't work for Internet-based businesses because it's hard for Web sites to know how many people will access a database, for example, at any given time.

"Our old model didn't work, and customers weren't happy that it didn't work. It was difficult to track who was connected," Goffe said. "Since our goal for the new technology is for building Internet applications, we figured we should introduce a new licensing and pricing model that absolutely works."

With today's move, Microsoft joins Oracle and IBM, which introduced processor-based pricing models last year for their database software.

The new pricing strategy is for Microsoft's forthcoming Windows DNA 2000 family of e-commerce software that runs on the Windows 2000 operating system.

Windows DNA 2000 helps businesses create e-commerce sites. It includes six old and new products, including the SQL Server 2000 database program; the Host Integration Server 2000, software that allow businesses to link corporate information from mainframe computers to the Web; and the BizTalk Server 2000, technology that allows businesses to integrate software.

Goffe said all the products but one will switch to the processor-based pricing plan. The exception is the SQL Server database, which will offer either the per-person or the processor-based model.

While most prices will stay the same, he said, the price of the SQL Server Standard Edition will drop 10 percent and its Enterprise Edition will rise 50 percent.

The Enterprise Edition will cost more because it's faster and has better features, Goffe said. As previously reported, SQL Server 2000 will offer a feature called "partitioning," which gives businesses the ability to divide the workload across different high-end server computers.

Giga Information Group analyst Terilyn Palanca said the change in pricing model is a smart move for Microsoft.

"It shows Microsoft is getting serious about how they compete in the marketplace," she said. "You won't believe the licensing negotiations they had to go through. It would take six months to get the licensing right. Now it's 10 times faster."

Palanca predicts the price increase for the Enterprise Edition will actually help database sales. Microsoft has historically sold SQL Server 2000 at a low cost, leaving potential customers with the impression the product wasn't up to snuff.

"They lost enterprise sales just out of perception," she said.

 

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