'Sheer greed': Industry reacts to Oracle's new Java pricing

'Vendors have worked out a model where they can get more money out of you'

IT leaders are spitting tacks this week after Oracle moved to massively hike licencing fees for the open source Java language. One customer, speaking on condition of anonymity, tells us subscription models are jeopardising profits.

Subscription (or consumption) models have boomed in the last decade, as software vendors seek recurring revenue: a big driver for venture capital investment.

When prices remain roughly comparable to the one-off cost of buying software outright, this is all well and good; but when costs spike and IT gets blamed, who bears the brunt?

In the closing days of January Oracle announced a change to the licencing model for Java standard edition (SE) from a per-user price to per-employee. This means that, for new customers, the price of a Java licence will be based on total number of employees (full-time, part-time, temporary workers, consultants and contractors), not just those using the language directly.

Some CIOs we talked to said they will take this as an opportunity to quietly exit stage left, dropping Oracle as a supplier as alternatives become available. Others are not so lucky, relying on Java - one of the world's most popular programming languages - for essential systems.

From capex to opex

One IT leader, who wished to remain anonymous, said the move to consumption models was hurting his business's bottom line.

"With all these companies you used to be able to buy a CD and capitalise the cost over five years. Now it's a subscription model and the costs are all operational...and effectively costs have gone up as much as 100%.

"Vendors have worked out a model where they can get more money out of you."

The person, who leads IT at a large multi-national firm, took Microsoft - one of the first vendors to move away from single payments and towards recurring revenue - as an example.

"We used to buy Office 2012 for £300-£400 and spread the cost over five years, at a maximum cost of about £100 a year to use to our heart's content. Now a subscription model is £50 a month for Office 365.

"Multiply that by all our staff and our costs have risen by £109 million."

The costs are huge for enterprise-scale firms like the above, but small companies may bear an even greater burden considering their comparatively lower budgets.

An SME with 250 employees and a modest Java presence - say, 20 desktop users and eight Java processors - would pay around $3,000 (£2,435) a year under the old pricing model.

With the move to per-employee pricing, that same firm would pay $15 per user per month: $3,750 (£3,000) every month, or $45,000 (£36,500) a year, 14 times higher than the original price.

Oracle, we'll reiterate, is not forcibly moving existing users to the new pricing model; it only applies to new customers.

"The new Java SE Universal Subscription was developed based on feedback from our customers with Java workloads running in increasingly diverse environments," Oracle said. "It no longer requires customers to count every single Processor, Desktop, or Named User that may be using the subscription, and the permitted use is universal across desktop, servers, and cloud infrastructure. Java SE Universal Subscription is a new product and does not change anything for existing customers with the previous Subscription offering."

The vendors are winning

The CIO we talked to said the senior leadership at their firm had already described IT costs as "crippling," but continued to hire people, putting the tech team into a difficult position.

"IT vendors are increasing costs by 25% a year to keep up with their revenue targets. This is why I'm not a fan of the cloud - once you're in, you can't get out. Sharepoint is a good example: The way Microsoft saves versions of your files can't be replicated, so if you do extract yourself from SharePoint you'd have individual files for each version, ballooning your storage."

"Everything," they said, is moving to a model where customers are charged per-user or based on usage.

"It means the vendors are winning. They'll say you're getting incremental updates [to justify the higher costs], but we might not want those updates."

Sheer greed

Donald Gardiner, MD of P&Q International, is less circumspect. He believes Oracle and other companies have "one hell of a cheek" for trying to profit from open source systems like Linux and Java.

"It is just sheer greed... I have never heard of pricing a language this way, especially at such exorbitant prices per head for people that aren't even using it."

While he's against this move, Gardiner believes that per-employee pricing has a place: specifically, when only a few people use the system directly but everyone in the organisation benefits, such as payroll and HR software.

"In my view, a programming language is a very different type of software and completely inappropriate for this pricing model - and that is multiplied a thousand-fold when it relates to open source software...

"By all means quote me. People need to stand up and reject such blackmail / ransom unequivocally."

Ian Hill, director of information & cybersecurity at Upp, shares that view, referring to Oracle's move as "legalised ransomware."

"[This is] another example of Oracle living up to its reputation as one of Silicon Valley's biggest corporate bullies... Considering that Java is in principle open source, ever since Oracle acquired Sun Microsystems in 2010 it was always on the cards that they would find a way around the open source hurdle, fully commercialise Java and maximise its profit potential through what some might argue is a form of legalised ransomware.

"After all, to the pursuit of profit, customers are just a necessary inconvenience."

Other industry leaders, who declined to be quoted, wondered how long it would be before companies and developers switch away from Java, or write an equivalent language at a lower cost - or even what they called "real open source."

Oracle's move to more heavily monetise Java is clearly proving controversial, but it remains to be seen whether any customers will - or can - follow through with their threats and drop the language entirely.