Oracle beefs up outsourcing services, pricing

SAN DIEGO, California – Oracle Corp. has unveiled new user-based pricing for out-sourcing and announced how it is automating key processes involved in the delivery of what it says is the future of the software business.

In a meeting with interna-tional press delegates to Oracle AppsWorld, Tim Chou, Oracle Outsourcing president, said the new user-based pricing benefits customers by giving them the flexibility and predictability in managing their IT costs.

The new model allows compa-nies to license Oracle software as a managed option on a per-user basis, which Oracle executives believe will make outsourcing even more appealing to cost-conscious customers.

Instead of buying fixed soft-ware licenses, Oracle outsour-cing customers will pay only for what they will use.

The flexible pricing option is based on the outsourcing loca-tion. It costs more when the service is carried out at Oracle’s Data Center compared to when it stays at the customer’s site.

For example, Oracle will charge $150 a month for Profes-sional Application User hosted at its site, and $90 a month when it is at the customer site.

Today, 75 percent of Oracle outsourcing customers are hosted at its data center. The rest who prefer to have the outsourcing service executed in their own premises do it because of security, privacy or other business reasons.

Chou said other customers are compelled by certain laws to keep their data in-country or they are simply "server-huggers" because they like their data close to them.

As outsourcing snowballs worldwide, Oracle Outsourcing is keeping pace enough to make it one of Oracle’s growing businesses, if not the fastest.

But Chou modestly said the business he oversees is still "not appreciably big yet" when one takes the entire size of the Oracle organization into consideration.

"We are growing over 85 percent. We’ve been quietly doing on-demand computing while other vendors are just starting to talk about it. People ask us if the outsourcing model appeals to specific industries and sizes of companies. It’s good across all industries of all sizes. It gives us the opportunity to go to the mid-market and large custo-mers…Centralized computing is the thing. We believe all our clients will end up in this model," Chou said.

Since it is not Oracle’s practice to disclose revenue figures and projections, Chou merely sized up the outsourcing market based on market researchers’ findings.

Quoting Gartner, Chou said 83 percent of companies’ IT budgets are spent on managing software. In absolute value, it comes to around $80 billion a year, he said.

He also cited Gartner’s data that established the cost of managing a piece of software to be four times its purchase price for one year. If the software is bought for $100,000, a customer will possibly spend $400,000 a year managing it or $2 million for five years.

"It dominates the budget of most CIOs. With outsourcing, we easily save our customers 50 percent of what they will spend if they manage Oracle software on their own. The $80 billion is the opportunity available to us," Chou said.

With Oracle Outsourcing, Oracle experts manage its customers’ software to improve the availability, security, performance and manage-ment of their information infrastruc-ture. Outsourcing provides compa-nies with a lower total cost of ownership by allowing them to spend less time and money in maintaining their Oracle applications and more time focusing on their core competencies.

"Managing these critical applic-ations is tough. We want to help our customers to just focus on their core competencies. We’ve done it (soft-ware management) hundreds of times while they are doing it just for the first time," Chou said.