As I’ve noted (Hardware Makes Software Pricing Harder and Software Pricing Followup: Fractional CPU Pricing) technical advances are muddying the waters for enterprise software vendors. Until now, Oracle had insisted that customers purchase licenses for every CPU on a Sun box, even if the customer was using partitions to limit the number of CPUs running their Oracle database. Oracle argued that the partitioning was not absolute and customers could overshoot their CPU allotment. With list prices at $40,000 per CPU, the difference adds up quickly.

With Solaris 10, the latest version of Sun’s operating system, firm limits on CPU partitions made Oracle more comfortable. Now, customers only need to pay for the CPUs on the partition running Oracle.

Technical details aside, the arrangement restores competitiveness to one of the most potent combinations in enterprise computing– running Oracle databases on Solaris-based systems. The earlier arrangement had cost Sun a lot of deals against other hardware vendors who could provide a lower Total Cost of Ownership (TCO).

Sometimes it’s not enough to consider your own pricing and competitive pricing– you need to think about “ecosystem pricing” from the customer’s perspective. (See The Value-Price Waterfall for more thoughts on the customer’s view of your pricing.)

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