December 4, 2003 5:47 AM PST

PeopleSoft to tweak software fees

PeopleSoft plans to introduce a new pricing structure for its line of business applications next month as part of its postmerger integration with J.D. Edwards.

PeopleSoft's acquisition of fellow software maker J.D. Edwards earlier this year brought the new pricing scheme into the fold. Whereas J.D. Edwards customers typically pay a straight, per-user license fee, PeopleSoft takes into account a complex set of variables, including the size of its customer's staff, its annual revenue and its physical assets.

The Pleasanton, Calif.-based company says such a model is easier to administer than the per-user one.

While the details of the new, unified pricing scheme have yet to be finalized, the structure will probably closely resemble that of the multivariable PeopleSoft model, said Les Wyatt, a PeopleSoft general manager and former J.D. Edwards executive. Wyatt declined to discuss actual prices, citing company policy.

Wyatt stressed, however, that the overall license fees for J.D. Edwards software, specifically the line now called PeopleSoft EnterpriseOne, should not increase under the revamped pricing structure. Rather, the adoption of a common model should help the company merge its sales teams and facilitate sales of PeopleSoft applications to J.D. Edwards customers and vice versa, Wyatt said.

PeopleSoft charges its customers proportionally higher maintenance fees--a recurring fee for upgrades and support--than does J.D. Edwards. Wyatt said that the company would also bump up maintenance prices for some J.D. Edwards products.

Analysts said the PeopleSoft pricing scheme might not sit well with many J.D. Edwards customers, and analysts said they had difficulty believing that charges wouldn't increase for some customers.

Under PeopleSoft's traditional model, for instance, customers whose revenue rises after their initial purchase of the software could end up owing PeopleSoft more money later on, regardless of how many employees use the system, said Forrester analyst Byron Miller. "It's kind of onerous," Miller said.

PeopleSoft?s acquisition of J.D. Edwards created a business software powerhouse, just ahead of Oracle and behind market leader SAP in total revenue. PeopleSoft is also the target of a continuing acquisition effort by Oracle, which launched its bid in June. That acquisition effort continues, despite being hobbled by a number of obstacles and a protracted regulatory review of the proposed merger.

 

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