Sun pricing model impresses users

Sun Microsystems users were clearly intrigued by the per-employee software pricing model the company announced last week, saying...

Sun Microsystems users were clearly intrigued by the per-employee software pricing model the company announced last week, saying they would investigate the model with a view to saving money or, at least, getting their hands on some additional Sun products at no extra cost.

At its SunNetwork conference last week, Sun announced a radical plan to offer all of its infrastructure software products, including its directory, application and portal servers, in a bundle called the Java Enterprise System - all at a fixed annual cost of $100 per employee.

The idea is to free users from having to negotiate complex pricing deals based on "fuzzy" variables such as how many processors a product runs on or how many people use it.

"I like it because at least it's straightforward and predictable," said Thomas Insel, a Unix administrator at Gracenote, a company licensing media software to consumer electronics makers. 

He added that he was also interested because the licensing model could give him access to Sun products that he was not using before. The company has only 50 employees, so at $100 per employee, the new pricing structure makes Sun's entire middleware lineup far more affordable.

Some larger corporations anticipate similar benefits. One large US financial services company installed the Java Enterprise System as part of Sun's beta program. With 5,000 employees, it determined that buying Sun's complete package of software would give it access to more Sun products than it had before for the same price, said the company's senior IT architect, who chose to remain anonymous.

Although Sun maintained that haggling over price isn't an option under the new model, the financial services company still managed to strike a deal. "There's always room for negotiation. If it's not on the software, it's on the services or something else," the architect said.

Beaumont Hospital in Dublin also tested the Java Enterprise System, but it does not intend to make the move. Much of the server software the hospital uses is open source, including the JBoss application server and the OpenLDAP directory server, so it would end up paying more, said Tony Kenny, the hospital's IT project manager.

Beaumont is in the process of switching 12,000 employees to Sun's Java Desktop System (formerly Mad Hatter), Sun's open-source alternative to Windows and Office. The hospital has faced deep funding cuts, and the price of the desktop system - also $100 per employee per year - made it more attractive than Microsoft's software, Kenny said.

Kenny said he was generally pleased with the software so far, although functionality is limited in some areas such as remote desktop management.

Honour system

Sun officials said they adopted the per-employee model because it's simple and can be verified in US regulatory filings, where public companies must disclose their employee counts.

Outside the US, the company will rely on the honour system, said Sun chief executive officer Scott McNealy.

Some customers will benefit more than others, Sun acknowledged. Executive vice president Jonathan Schwartz said his worst customer visit was with the Indian Ministry of Railways which, he said, has 15 million employees. "The quote of $1.5bn didn't go down too well, but we'll figure something out," he added.

Having a high employee count was enough to make a large US beverage company hesitant. An IT manager who asked that neither he nor his company be identified said the simplicity of the pricing model is very attractive. But his company employs thousands of warehouse workers who do not use any software, he said, "so we'd have to take that into consideration."

One of the first users to sign a contract under Sun Microsystems' per-employee pricing model was Chicago-based publishing house World Book. With 300 employees, the company is paying $30,000 annually for the Java Enterprise System.

World Book chief technology officer Tim Hardy estimated that he would save between 50% to maybe even 75%. "We were a Sun user with a standard per-processor-type pricing model. But we have such a high proportion of users of our applications that run on Sun as a ratio to employees, the per-processor pricing model is a lot higher," he said. 

"So it was really a no-brainer for us. It also offers up opportunities for us we may or may not have done otherwise, because we're sticklers about turning a profit. So we wouldn't have done some of these things or bought some of these things if it wasn't a demonstrable moneymaker."

James Niccolai and Don Tennant write for IDG News Service

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