Multicore move cuts Oracle database cost

Facing Microsoft pressure and new multicore chips, Oracle quietly cuts database prices for some lower-end servers, News.com has learned.
Written by Stephen Shankland, Contributor
A correction was made to this story. Read below for details.

In a move designed to counter Microsoft's growing database influence, Oracle has quietly cut software prices on some lower-end servers using multicore processors, CNET News.com has learned.

With the new pricing for Oracle's lower-end Standard Edition and Standard Edition One products, the software company now is effectively matching Microsoft's practice of pegging price to a server's processor socket count and rather than processor core count. The move could cut the costs of purchasing Oracle database software by as much as 87 percent in some cases.

The move, described in an unpublicized pricing document (PDF) on Oracle's Web site, took effect February 16, just days before Microsoft announced an update to its rival SQL Server 2005 software.

Oracle is feeling Microsoft's sting, Technology Business Research analyst Stuart Williams said.

"With Microsoft reporting 30 percent-plus revenue growth each quarter in SQL Server for a couple of years now, this is a sign that Microsoft is getting strong adoption in a growth segment of the database market," for example outside large data centers and in smaller countries, Williams said. "That must chafe Oracle."

Oracle confirmed on Thursday the licensing change but didn't respond to further questions.

According to the modified licensing rules, customers now may run Oracle's lower-end Standard Edition and Standard Edition One products on systems with as many as four or two processors, respectively, with no limit on the number of cores. Previous limits precluded use of the software in some multicore configurations--for example, Standard Edition One on a system with two quad-core processors, according to Oracle's Software Investment Guide.

One example of a price break with the new scheme concerns a server with four quad-core processors. Customers no longer must buy licenses for each of the 16 cores to run the top-end Enterprise Edition, but instead may buy licenses for the four sockets and run Standard Edition. That cuts list licensing prices from between $320,000 and $480,000--depending on Oracle adjustments that factor in multicore processor performance--to $60,000.

Servers with four quad-core chips are relatively rare right now, but Intel and Advanced Micro Devices plan to release processors for that segment later this year.

Oracle's new pricing also means that a customer whose server uses two quad-core Intel Xeon 5300 chips may run Standard Edition One for a $9,990 licensing fee instead of Standard Edition with a $60,000 fee.

Microsoft applauded Oracle for following Microsoft in what it called the right direction. "The market wants simple, flexible licensing options," and Microsoft works to ensure its licensing policies help customers and partners, the company said. "It's nice to see others in the industry doing similar things."

Redwood Shores, Calif.-based Oracle is effectively modernizing its licensing policies to accommodate the arrival of multicore processors, those with multiple processing engines on a single slice of silicon or in a single chip package. The company already has changed course twice because of new chip realities--once in July 2005 and again in December 2005.

Server makers and chipmakers, constrained by spiraling chip power consumption, have turned toward multicore processors rather than higher clock frequencies as a way to boost performance. Software companies accustomed to basing license fees based on processor tallies preferred to count processor cores, but hardware companies such as Sun Microsystems, Intel and Advanced Micro Devices urged a definition of a processor as that which plugs into a socket, regardless of how many cores it employs.

In the new licensing document, Oracle touts its pricing as "simple and flexible," but some might consider that a stretch. For example, when purchasing the company's flagship Enterprise Edition database, the price is based on a formula that multiplies processor cores with a "processor factor" that varies from one chip to another.

An Oracle Enterprise Edition license for an IBM p5-570 server with four dual-core Power5+ processors, for example, costs $240,000--eight cores times a processor factor of 0.75 times the $40,000-per-core license rate. A Sun T2000 server with a single eight-core UltraSparc T1 "Niagara" processor costs $80,000--eight cores times a 0.25 processor factor times the $40,000 rate.

Flexibility is another challenge for software pricing. Oracle's prices are geared toward servers as static entities, but with partitioning and virtualization technologies, a server foundation is becoming ever more mutable. Unix servers from Sun, IBM and Hewlett-Packard permit partitions to be expanded or shrunk at will, while virtual-machine technology from companies such as VMware permit operating systems and their accompanying software to be moved from one server to another while running.

Oracle isn't the only software company facing these pricing challenges. Indeed, Microsoft, while it seized the offensive with per-processor-socket pricing rather than per-core pricing, faces accusations from VMware that its licensing isn't flexible enough for the coming era of virtualization.

Oracle's new structure essentially is a partial accommodation of today's new realities, said Redmonk analyst Stephen O'Grady.

"They're trying to go half way," O'Grady said. "Oracle has always been at one end of the spectrum. They've come a little bit down the path. But if the underlying philosophy is (still charging per processor), there's only so much adjustment you can make."

Ultimately, software licensing and support fees will move toward models where customers can use as much software as they want, O'Grady predicted, a change that Oracle competitors such as open-source database specialist MySQL are pushing.

"Open source is pressuring (Oracle) not just from a technology and adoption perspective, but also from a licensing perspective," O'Grady said. "If you compare MySQL's pricing, they'll give you site-wide license for the cost of single CPU's worth of Oracle. For $40,000, they'll support you site-wide."


Correction: This report miscalculated the price of an Oracle Enterprise Edition license for an IBM p5-570 server with four dual-core Power5+ processors. It is $240,000.

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