TechWeb

Sun Readies New Software Pricing Plan

Feb 25, 2003 (07:02 PM EST)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=8700508


Although Sun Microsystems has been promoting the integration of all its software products into the Solaris operating system for nearly a year, the company added a new wrinkle Wednesday by revealing additional ways of licensing its software. Within the next six to 12 months, Sun will begin offering customers the choice of paying for software based on a flat annual fee, a variable utility-type fee, or the more traditional model of per CPU or user.

The integration of Sun's software will help the company implement the flat-fee and utility-pricing models. Sun is unable to say when it will offer completely integrated software that includes directory server, identity server, portal server, application server, clustering, and messaging apps. But Jonathan Schwartz, executive VP for Sun Software, expects that weaving the company's software together will let it cut prices significantly.

According to Sun's vision, a company with 20,000 employees could expect the cost of this integrated software to be only 10% of the cost to purchase, implement, and integrate the individual apps. By cutting such costs, Sun hopes to compete in the small- and midsize-business software market against Microsoft.

"We'll sell our software at 50% (the cost) of what Microsoft offers," Schwartz says. Sun can afford to do this, he adds, because small and midsize businesses are a new market for the company, and it can always make up the margins on the hardware it sells. "One of our goals is to move software integration off the customer's (profit-and-loss calculations) and onto Sun's P&L," Schwartz says.

As vague as Sun's time frame is for delivering a completely integrated software and operating-system package, the company's plan for offering software on a per-use basis is even less clear. Schwartz admits he's not a big advocate of usage-based software pricing because of the difficulty of finding a unit to measure and bill for usage. But, he admits, "there appears to be a euphoria in the market over this."

Sun plans to extend metered and flat-fee pricing to users of its Linux-based software as well.