Oracle to scrap licence fees

For most of Oracle's customers, paying costly licence fees will soon be a thing of the past as the company moves towards offering its software as a chargeable service over the web.

At the Oracle AppsWorld conference in Paris this week, chief marketing officer Mark Jarvis said that he expects to see the new pricing model become a dominant part of Oracle's income.

"In three to four years' time, half of Oracle's revenue will come from software as a service. Every application will become available online," he said.

Sergio Giacoletto, executive vice president of the company's European operations, believes there will be a change in the way Oracle customers pay, moving away from licence fees to regular service charges.

"We believe that over time most software will be delivered as a service. This is the beginning of that movement. There will be more annuity-based business. The question mark is how quickly customers will make that move," he said.

But there is debate within Oracle as to the effect the move will have. "Online services provide an opportunity for companies to begin the transformation to ebusiness. It is not in competition with our licence fee business at all," explained Mark Barrenechea, Oracle's senior vice president of customer relationship management products.

Oracle also announced that the customer support functionality of its ebusiness software is now available on the internet for companies to use free of charge. The service, called support.oracle.com, complements the sales and marketing offering, sales.oracle.com, which was launched in August last year and has gained 200,000 subscribers so far.

The company expects this to increase to half a million users this year with the addition of the support capability. The basic functionality is provided free, but additional services are chargeable. These online services are separate from BusinessOnline, Oracle's application service provider operation.

The oracle.com website is also being relaunched as a business portal, offering independent news and business services with over 160 different applications that users can personalise to their own requirements.

Companies will increasingly adopt 'software as a service' offerings over the next 18 months, according to Nigel Montgomery, ebusiness research director at analyst AMR Research.

"The economic squeeze will drive the trend," he said. "Companies will not have to purchase software as a capital item. Oracle has seen this opportunity. However, it opens the supplier up to more competition as the software is no longer a balance sheet item."