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The Shape of Licensing Costs to Come


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One fall semester many years ago, I was a university freshman.  Actually, I was anything but "fresh." I was dumb enough to think that 8 a.m. was a wonderful time to attend Economics 101. After staying up  until the wee hours most every night, the "dismal science" took on more than one meaning as I set my clock just early enough to get to class on time.  Along with 30 other very naïve classmates, I staggered into class and did my bleary-eyed best to focus on the lessons at hand.  There were lots of Greek compound words and lots of graphs.  I learned, for example, that the word economics derives from the Greek "oikonomikos," which means, approximately, "death by slidedecks" and, specifically, "house" (oikos) and "management" (mikos).  I barely survived the experience and never took an 8 a.m. class again.  Imagine my surprise, then, when a lesson I'd learned (and promptly forgotten) all those years ago jumped back into my consciousness late last year.

At the water cooler in the summer of 2009, I learned from some of my Oracle-using friends that the eponymous database company had raised the prices of a number of products as much as 40%. I thought that was a pretty bold move in such a lean year.  (Read more at http://www.oracle.com/corporate/pricing/pricelists.html.)  Of course, few customers buy these products at list price and almost always go through some negotiating, but any rise in the bottom line price is bound to make a difference in net price paid by customers, especially new ones.  Within a couple weeks of Oracle's announcement, I noticed Microsoft making noise about how their database offering was not increasing in price.  That seemed like a good strategy to me, since SQL Server is well known for its price and performance.

Within a month, I began to see such news outlets as Financial Times (http://www.ft.com) reporting analysts' disappointment with Microsoft's quarterly numbers, along with news that Microsoft's Server and Tools Division was one of the company's bright spots at growing revenue.  I didn't think too much more about it until last November's PASS 2009 Summit in Seattle, when Microsoft announced new, higher pricing, and some fairly significant changes to the current SKUs available for SQL Server. 

That's when the light bulb went off and I had the "aha!" moment that would've made old Professor Letourneau proud.  Oligopoly!  I was probably the only person in the room who didn't instinctively remember this market form.  Back to Greek root words, we have "oligoi," meaning few, and "polein," meaning to sell.  In an oligopoly, there are very few sellers of a product, so each has an intimate understanding of what the other is doing, thereby influencing the actions of the others. Oligopolies, like monopolies, tend to have rather stable pricing among the competitors because the demand curve is rather inelastic (which means it doesn't respond much to minor price changes).  Oligopolies also tend to raise prices in lock step, seldom lowering them because of the likelihood of a resulting price war.

Once I put two and two together, I realized that, of course, Microsoft would raise their prices on SQL Server soon after Oracle.  In fact, I would've expected to see Sun raise their prices on MySQL, and IBM raise their prices on DB2, as well.  But Oracle and Sun had already entered acquisition discussions, thus taking MySQL out of the equation.  (Isn't that convenient?) And DB2 is already at the top end of the price pyramid.

So what should you expect for the licensing costs of your favorite DBMS product in the near future?  If old Professor Letourneau was right, and I'm sure she was, prices will remain fairly consistent and when prices change, the adjustments will always go upward.


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