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SOA Provides the Capability to Charge For Software More Easily Based on Usage, But How Does a Company Overcome the Distrust of 'Cheap' Software?

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From John Power of Risaris: For many years, large organizations have been requesting usage based pricing particularly in relation to mainframe systems. The idea being that the organization only pays for what they use whereas on mainframe at least, software companies used to charge based on the size of the mainframe no matter how much the software was used. On open systems platforms it was normally based on the number of CPUs or Cores.

We are finding that when we talk about usage based pricing, with large organizations, they don't tend to trust 'low' prices on the basis that it cannot do what they want. I'm interested to get people's views on whether people only feel they can trust a service or software license that they pay a lot of money for.  So how can a company overcome that?

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  • There's a certain culture in Manhattan that believes something is inherently better if you've got to pay more or wait in line for it. IT shops, particularly in large companies, often have the same mentality. And perhaps they're right in many cases, but it's often an uninvestigated stance they're taking. The reality is open source and subscription-based software is doing plenty of heavy lifting out there.

    The upside of this software procurement model is users can put it through its paces before they decide whether to pay for it. Users should want to be shown rather than sold and that's where lower cost competitors need to place their stake in the ground.

    Just my opinion, but users need to overcome themselves more than anything. All a lower cost vendor can do is fight for the right to prove itself and make the most of the chances its given.

  • Quality and User Experience...

    High quality software that provides good value should not be considered "cheap" on the contrary it will have a viral effect because the barrier to entry is low for the return in value.

    The other factor to the label of cheap software is poor "User Experience". A good user experience will increase the satisfaction of the service and that will create an impression that the consumer received high value for a low price.

  • This isn't really a technology issue (question), it's a sales & marketing question. So I'll reference the expert that I go to for Sales & Marketing advice: Jeffrey Gitomer (http://www.amazon.com/Little-Red-Book-Selling-Principles/dp/1885167601a).

    This is a value question. If you're talking price before the customer's been sold on the value of your software, something has gone very wrong in the sales cycle. Once the customer understands the value and sees it will meet their demands, then you can discuss that the sales model is subscription-based versus licensed-based.

  • The top three things that I think people are rightly leery of are control control and control.

    I saw Peter Coffee's talk on behalf of Salesforce.com and their cloud here at the Burton Catalyst conference in San Diego. His comment was if at any point you dont like their services you can discontinue it.

    This is a disingenuous statement imho.

    Just because the first "hit" is free doesnt mean you should take a puff.

    I'm not suggesting that there's any problem with your business model or offering, just that it's easy to be seduced by offers of low low prices and opex vx capex and get locked in to a vendor relationship with will be "monetized" in ways that you might not appreciate over time.

    My 2 cents,
    Miko

  • In my interactions, often the company wanted to see similar service oriented architectures and deployments, in other organizations. That really made the difference in addressing their concerns – not so much the pricing. So they want to know if others have successfully deployed solutions on similar architectures - with the scale, complexity, platforms, and benchmarks of their operations. Once you illustrate success stories of comparable deployments, the pricing issue becomes secondary (if that).

  • I agree with JP - this is definitely a sales and marketing question not a technology one.

    Selling the value of what you have on offer is a completely separate issue from price. Once the customer is sold on the value of what you provide, then relatively speaking price is a detail.

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