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Anne Stuart’s BPM in Action

Dennis Byron

How Do Stack Vendors Price Business Process Management Software

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Comments on the "Appian/Why not BPM?" blog post begat the "Pure Play vs. Stack Vendor" blog post begat the "Do Stack Vendors Stifle BPM Innovation" blog post.

So what's next? A subtheme in the discussion about innovation and the major stack vendors treating BPM as a 'throw-in' relates to how business process management (BPM)-enabling technology is priced. And just as the 'BPM as throw-in' innovation discussion has general applicability, so does a BPM pricing discussion.

Of course thinking of this subject as about pricing is vendor/market-research-analyst navel gazing. You probably think of the price of your BPM technology as a cost. Hopefully sometimes you think of it as an investment.

Picking on Oracle again (because they publish price lists) note that the BPM related choices on its US Technology Commercial Price List are among the most expensive items in the application-server-middleware category. I see a similar pattern in other suppliers' pricing that is made available to analysts but not published. It's not common sense for a supplier to be "throwing in" its most expensive item. And it's not natural human behavior--even in a heavily horse-traded functional area like enterprise software--for IT users to expect the most expensive items to be "thrown in."

I'm not defending the stack vendors' marketing abilities. Why Oracle puts BPM in the application-server middleware category is probably worth another blog post some day. And I have criticized IBM for an odd approach to marketing BPM as well. But the stack vendors' pricing philosophy tells me that that they think their BPM technology has value and that they are investing in it.

-- Dennis Byron

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There's a big difference between listed pricing and actual pricing.
For example, let's say I sell a car with very expensive features A, B, and C. My customer tells me he is going to Bargain Motors across the street where they have very competitive offerings for A, and B, but at a lower price. But, Bargain Motors does not have a C offering. If he wants that, he'd have to go to the aftermarket... or do without.

So, I tell him C is very in-demand, I can only give him the standard 10% discount on that. But A, and B, I'll throw those in for free. What a deal - he can't beat free at the Bargain Motors dealer across the street. Of course, he's spending as much or more than A+B cost by buying C at a discount of 10%. And my cost of parts is virtually zero because someone else already built them and I have a practically infinite supply in my warehouse. So I'm only sacrificing opportunity cost in giving these away. I win the deal, hurt competitor, get a customer, and protect the core business all along, which was C.

So why use a car analogy? well, in software, the customer is buying a solution (the car is the driving solution), and if they're buying a BPM solution, I think you can guess how this works.

The trap here, is that the A and B parts from Bargain Motors may actually be better than the ones from me. And because I'm giving them away for free, my CFO is going to cut investment in those products because they don't appear to help the bottom line much - he'll call it aligning cost with revenue. In fact, I'm just unloading A and B because I got them in a merger. In my heart of hearts, I think C is the center of the universe, even though the rest of the world hasn't figured it out yet...

So, its just a thought experiment... ymmv...

Dennis,

interesting view by some people on "evil" stack vendors trying to price competitors out of the market through bundling.

Not even taking legal aspects (MS rulings on IE bundling etc.) into account, the market can rest assured that every individual product manager at a stack vendor has to prove "his" component's success individually.

Imagine the BPM guy walking up to the integration server guy saying "bundle my stuff in and then allocate 40% of your revenue back to me". Doesn't happen, believe me.

Now a totally different story is bundling in a large, multi-product enterprise deal. But this falls into the horse-trading category I fear...

What I can tell the market is that SAP's BPM component, which I'm marketing, is carrying its competitive price tag like anybody else's BPM solution.

Best, Harald

For an example of how stack vendors do this pricing gymnastics, check out:

http://blog.lombardicto.com/2009/07/flash-free-ibm-bpms-worth-exactly-what-it-costs.html

phil gilbert gives a fairly amusing account of how this work with IBM as the stack vendor in question.

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Business process management and optimization -- philosophies, policies, practices, and punditry.

Anne Stuart

I am the editor of ebizQ.

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