Comments on: On Frogs and Software Pricing

By: Sunny Dronawat

Sunny Dronawat — Fri, 10 Oct 2008 19:23:39 +0000

Great Article and we are experiencing the what the article talks about. A lot of our customers are going with SaaS as they dont want to deal with IT departments or dont want to spend a lot of money upfront. SaaS makes ROI very attractive.

By: Ad

Ad — Tue, 07 Oct 2008 09:59:47 +0000

Subscription based pricing as an alternative for up front licenses is all about ‘management of expectations’. Up front pricing is by a growing usage a declining line for the customer and a constant line for the vendor. Subscription based pricing is an increasing line (gradually flattening at least that is what the customer should expect)for both the vendor (more revenue) and the customer (more costs). And the question is where and when do both expect that the lines of both models will intersect.

So who is the optimist and who is the pessimist?? But in uncertain times like today moving costs towards the future is something that every CFO is interested in.

By: tq

tq — Tue, 07 Oct 2008 02:10:46 +0000

You are spot on about the Salesforce model. Very compelling upfront, but starts becoming pricey as you add a) users, and b) additional functionality.

I think the Kalido option is ideal for the SaaS model – it means that many of the initial headaches will disappear, but, just like Salesforce, this also creates other isses, such as transferring large amounts of data to the cloud. I will be very interested in seeing the proposed pricing for this solution.

By: Mahboob Hussain

Mahboob Hussain — Mon, 06 Oct 2008 23:37:22 +0000

Customers expect any sort of pricing to go down rather than up for buying in bulk. Salesforce seems to have fixed per user pricing which may yield better returns in the near-term but as serious competitors appear this sort of pricing model will be unsustainable. Unless of course the competitor prices it the same way but I’m sure some form of undercutting will appear to get customers signed-up. In fact netsuite are already doing this (http://www.netsuite.com/portal/press/releases/nlpr10-09-06.shtml).

From what I can tell SAAS is certainly picking up and gaining acceptance in the enterprise but I would disagree that its “the end of software(tm)” as the marketing shock-jocks at salesforce would put it.

SaaS is another software delivery mechanism which works for some apps and not for others.

Subscription Pricing is certainly an interesting problem to address. It has to be cheaper than the upfront cost of a perpetual license and also include operating costs (infrastructure, support, maintenance etc). Some vendors are even selling on-premise software with subscription pricing to lower barriers to adoption and help companies ease cost worries caused by the credit crunch. The current economic uncertainty may even fuel the demand for Saas and/or subscription pricing.

Interesting (and turbulent) times ahead for the software industry.