Commodity Price Inflation Hits Software (Oracle Prices Up)

Thanks to the Enterprise Irregulars, I was tipped off earlier today in an email exchange that Oracle is raising prices. According to the above-linked InfoWorld article, a "CPU license for its database is now $47,500, up from $40,000 ... Other price increases -- including among Oracle's E-Business Suite applications -- also fall into the 15 percent to 20 percent range." As InfoWorld points out later in their analysis, discounting plays a huge role in Oracle's pricing strategy. Still one analyst quoted in the piece nails the point when he suggests that, "these price hikes do raise the floor on pricing, and customers who would expect a 50 percent discount would have to ask for a 60 percent discount to get the same effect."

At this point, I'm guessing these price increases will impact the Oracle Advanced Procurement product line (and potentially PeopleSoft and JD Edwards products as well, though I'm not certain this is the case at the current time). But more important than price increases on these product lines is the role procurement organizations should play in negotiating software license agreements (or bringing in experts to do so) across the board. Given the complexities and the total cost ramifications of software decisions, procurement can play a critical role in helping CIOs to not only save money on a unit cost basis, but to get better deals for exactly what they need to buy (e.g., pushing off currently unnecessary seats that a rep is pushing). With cost inflation now hitting enterprise software and databases, there's never been a better time for procurement to get more aggressively into the IT sourcing game. After all, if we can save money in critical categories such as marketing and legal, can't we source an area that simply doesn't matter?

- Jason Busch

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