Oracle puts a price on single-tenancy
Oracle today announced a new centrally managed single-tenancy option for its SaaS CRM OnDemand application, along with various other features including unlimited custom objects. Existing prices remain the same, at $70 per user per month for the multi-tenant version and $125 per user per month for the previously available single-tenant enterprise version, which is a completely independent instance for which the customer can dictate its own upgrade and patch schedules.
The new 'standard' single-tenancy option comes in at $90 per user per month. It's still a dedicated server but, unlike the 'enterprise' option, Oracle decides when it gets patched and upgraded. "You can get your own stack of the application but we'll still manage it and maintain it on our standard schedules," Oracle's SVP of CRM OnDemand Anthony Lye (pictured) explained to me in a briefing late last week.
What's the benefit? Lye says that it's having single-tenant instances of each component of the application stack, including the database, enabling benefits such as custom performance tuning. He calls this option a 'sweet spot', perhaps reckoning that most customers will be happy to stump up this small extra delta to have a server (even if only a virtual one) that they can call their own.
What I found interesting is the way Oracle has effectively put a price-tag on single-tenancy, all other things being equal in terms of shared management and data center infrastructure — and it's set it at $20 per user per month. Assuming Oracle is operating on the same gross margins as Salesforce.com, that suggests the vendor has calculated the extra cost of managing separate instances at just a few dollars per user per month more than the multi-tenant version. But that may not be a viable assumption, because the single-tenancy option has a minimum of 350 users, so maybe Oracle has calculated that it breaks even once it's covered a cost of $7,000 per server per month.
The other consideration here though is that Oracle's pod system, which runs its multi-tenant instances on small clusters that often have slight variations from one another, isn't multi-tenancy as practised by the SaaS purists. Lye points out that Oracle's pod infrastructure can never succumb to the kind of total outage that Salesforce.com's servers sometimes undergo. "I'm patching and upgrading the infrastructure seven days a week. I'm just not doing it all at the same time." But the SaaS purists would argue that by doing so, Lye misses out on some of the most significant economies of scale of the multi-tenant model.
Lye's riposte is to claim that Salesforce.com adds on so many extra charges it works out far more expensive for customers. "We're not nickle-and-diming our customers here," he said. In illustration, he pointed out that in its new release, the CRM OnDemand application, with business intelligence, sandbox testing, disaster recovery and unlimited custom objects, costs $160 per user per month; whereas he has calculated an equivalent set of functions from Salesforce.com — including a third-party BI tool — would cost more than $400 per user per month.
Software as Services / Tue, 27 Jan 2009 23:33:05 GMT
Oracle is hoping to challenge Salesforce.com's lead in the realm of CRM software-as-a-service products.
Oracle is expected Tuesday to unveil its CRM On Demand Release 16. The software was designed to offer customers more flexibility in deployment and maintenance than what's typical of the traditional SaaS model.
With the new release, Oracle hopes to demonstrate that it can offer companies more options in SaaS CRM than marketplace leader Salesforce, which abides by the multitenant model.
Oracle has offered both a multitenant version of CRM, in which customers share servers and software, for $70 a month per user, and a single-tenant version, in which customers rent their own hardware and software and can control maintenance upgrades, for $120 a month.
With Release 16, Oracle is adding yet another option: a single-tenant standard edition, in which companies pay a monthly fee to rent their own, nonshared systems, yet must abide by Oracle's CRM On Demand schedule for maintenance and upgrades, priced at $90 a user per month. A fourth option lets customers run CRM On Demand on systems located at their own offices for $110 a month per user.
Also with Release 16, Oracle has opened up customization options and said customers can now configure as many custom objects as they like for such things as data analysis, fields customization, and data integration; previously, customers were limited to three custom objects per system.
Oracle develops pre-built objects for specific industries but had limited custom object development since it assumed most users wanted an "out-of-the-box" SaaS experience, senior VP Anthony Lye said in an interview. Oracle still offers pre-built objects, but has found that customers want more options in customization, he said.
These changes to CRM On Demand, which are made twice yearly, emphasize Oracle's philosophy that SaaS can be an animal of many shapes and forms, depending on customer preferences. As Oracle's SaaS strategy evolves, it's decided to "listen to customer requirements more than dictate them," Lye said.
For example, some companies may insist on their own hardware and software and have no problem abiding with Oracle's maintenance schedule, and would choose the $90-per-month option. However, a company that wants to dictate maintenance so it can avoid any changes during a transaction-heavy time period -- say, the open-enrollment period for a health insurance provider -- and also have its own software and hardware may opt for the $120-per-month choice.
Lye said that within the past few years, Oracle has developed application and database "pods" of both multitenant and single-tenant CRM On Demand systems in its data centers, so that if one pod fails, other customers aren't impacted.
The result, Lye said, is that you'll never see a worldwide outage that affects every CRM On Demand customer. And customers that want hosted CRM but don't want to share with others can have their own exclusive pod.
With the multi-/single-tenant approach, "what Larry [Ellison] has created is sort of a Hertz business, where we have a whole fleet of vehicles," explained Lye. "Some are buses, some are hyperperformance vehicles, and some offer fuel economy. What Marc [Benioff, Salesforce's CEO] has is a big mainframe."
In any case, all of Oracle's CRM On Demand options avoid the traditional -- and increasingly controversial -- software license and maintenance model, which InformationWeek examines in our cover story this week. Oracle president Charles Phillips emphasized to InformationWeek in a recent interview that Oracle supports both the traditional model and the SaaS model for all of its customers.
