March 19, 2002 5:25 PM PST

Pricing change irks Oracle customers

A pricing disagreement between Oracle and some of its database software customers has IT analyst firm Meta Group urging customers not to pay the database software maker additional licensing fees.

The dispute relates to how Oracle charges its customers when they transfer large amounts of data, known as batch feeds, to the Oracle database. These batch feeds are commonly used by companies to set up data warehouses.

Meta said customers believed that all employees involved in sending the batch feeds were covered by a single license, but Oracle said policy changes in recent years mean that each individual needed his or her own license.

"I have reviewed hundreds of Oracle contracts in the last two-plus years. None of them have contained provisions of that sort," Meta Group analyst Mark Shainman said.

Oracle acknowledged that they are talking to some customers about these licensing fees, but they said there isn't anything to dispute. The company says some customers are simply confused about a series of database software pricing changes that were announced in 2000 and 2001. These customers are now out of compliance, and the company was working with them to fix that, said Jacqueline Woods, VP of pricing at Oracle.

But Meta says customers see it as more than just being confused about changing pricing policies; the firm said several of their clients are now looking into moving their data warehouses off of Oracle databases because of the situation.

"Meta Group sees Oracle's attempt to redefine named users in a batch multiplex environment as questionable both on legal and ethical grounds," the company said in a statement. "Oracle has failed to provide convincing evidence that it has ever negotiated batch feeds as a form of multiplexing with end users."

Meta has a stake in the matter--analyst Charlie Garry said they had been advising clients that the batch feeds were covered by a single license.

On Tuesday, it urged its clients to not pay the fees, and even to fight it out in court.

"Meta Group urges that Oracle users who are told they are out of compliance with existing contracts based on Oracle's interpretation of named user refuse to pay extra license fees and resist Oracle attempts to collect them, in court if necessary," the company said. "Oracle's reinterpretation of existing contracts is of questionable legality at best and may not stand up in court."

Oracle has tweaked pricing of both its database and business applications software in the face of increasing competition from IBM and Microsoft in the database market and SAP and PeopleSoft in the applications market. And though technology spending is down across the board, Oracle's earnings for the last several quarters continue to fall short of Wall Street expectations while competitors have rebounded, indicating that the company may be losing market share.

Garry said Oracle has asked some companies, already paying millions of dollars for the software, to pay millions more. Oracle is telling customers they can either get the additional licenses or switch to a more expensive type of licensing that charges per server processor, he said.

Competitors such as Microsoft and IBM offer per processor pricing for their database products.

Woods said that Oracle customers that licensed the software prior to December 1999 and paid a single license per batch feed may continue under that model. Customers licensed after that date need to comply with the current pricing rules, which would likely mean switching to per processor pricing and an overall higher cost.

Oracle has 20,000 database customers in the United States.

"We're not using this as some kind of revenue opportunity," said Woods. "We've got a whole lot of other stuff to sell than a batch feed. We have a lot more to offer, and this is a blip in the radar screen."

 

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