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Technology Stocks : Oracle Corporation (ORCL)

ORCL 217.60

+1.5%

Dec 5 9:30 AM EST

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To: Lizzie Tudor who wrote (8346)	9/13/1998 8:46:00 PM
From: Michael Olin	Read Replies (2) of 19080

This is why you are having such a problem with dissecting the numbers to figure out exactly where the growth is. Once a customer purchases their server license, it is a pretty safe bet that they will purchase a support/mainenance agreement as well. In fact, the first year's support is generally included in the quote for the initial license. This fee is billed in advance (several years ago, it used to be in arrears and that made the support accounting very interesting). The lowest level of support that I routinely see customers purchase runs about 20% of the license list price annually. This includes all upgrades. So going from Oracle7.x to Oracle8i is a freebie (although the price of your support renewal will probably go up. If you increase the number of users you are licensed for, or change the underlying hardware/OS (I see this pretty frequently), they handle it by giving you a 100% credit for your existing license and then charge you for the new license (less whatever discounts you get). I don't know how they account for the credit, but I would not be surprised if the entire "new" license shows up when they report license revenue. If you don't have support you have two options. You can buy a new license (license revenue), or you can pay a "reinstatement fee" to get support. This fee is equal to the amount you would have paid if you had support since the later of when your support agreement lapsed or when you purchased the license. With "reinstatement" of support, your upgrade shows up as support revenue. So much for the pricing model. Since you get the upgrade for free, the general way that mid-to-large sized shops handle major version upgrades is: Get the new version. Create a test database instance (I have never looked into if this violates the license). Figure out what works and what doesn't. When you have it figured out, upgrade your production database. So...even if Oracle can tell you how many Oracle7 customers have ordered Oracle8x, that does not mean that they are actually using it in production. I hope this explains things somewhat. I am going to the Larry and Ray Oracle8i show tomorrow. I'll let everyone know what it looks like and what the reactions are. -Michael

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