App Attitude: How Much Is That?

The task of pricing out any software is daunting and leaves many IT staffers scratching their heads.

July 22, 2003

3 Min Read
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With an application's pricing dependent on myriad variables, including volume discounts and hardware dependencies, the task of pricing out any software is daunting and leaves many IT staffers scratching their heads.

Often there are too many variables in the equation, and some of them make no sense. It's perfectly acceptable to base pricing on the number of people that will use the application, but the calculations only begin there. You also have to ask how many users will be accessing specific functions and from where. Volume discounts may be applicable, depending on some secret calculation performed by the vendor based on the size of your organization, what day of the week it is and how often it snows in Kalamazoo, Mich.

One of the oddest variables has to be CPU-based pricing. The server portion of a client-server application is often listed as some dollar amount per CPU. I've never quite figured out the relationship between the number of CPUs and the price of software. You don't buy a special version of the application if you'll be deploying it on a machine with two CPUs rather than one.

Give It to Me Straight

I have yet to see straightforward, sensible pricing for large-scale business applications. Business intelligence, CRM, EAI and provisioning all depend on number of systems being connected, databases being queried and users, as well as the types of users, access methods required and, in many instances, the number of CPUs. In some cases, pricing also depends on the size of the organization--which makes about as much sense as the grocery store pricing milk based on your gross annual income.Software vendors should look at how their hardware vendor peers price devices. Yes, purchasing hardware can be as complex: There's the amount of memory, size of the hard drive, the CPU and a multitude of peripherals. But hardware vendors generally list the prices and offer configuration tools to assist you in pricing your desired package. Surprisingly, there are market-leading vendors who do offer a straightforward pricing model: Information Builders' pricing is exceedingly simple and is similar to fixed-configuration switch pricing; FrontRange in the CRM market offers everything for a single price; and application servers from Sun Microsystems, Novell and Iona--though based on number of CPUs--have straightforward pricing with no hidden gotchas. And don't forget those enterprise-class applications available as open source with an extremely easy-to-follow pricing model--free (as in beer).

But ISVs get away with this nonsense because we let them. We accept these twisted mathematical formulas because that's what we're offered. The only way to force a change is to, well, force the change. Rather than worry about computing prices yourself, give vendors an exact list of what you need and have them respond with a "bottom line." Better yet, when they start hemming and hawing about giving you a quote, be firm in your request for a simple, single price. If they start pushing options and modules and costs, just shake your head no. Check if there's an alternative in the open-source or commercial community that offers a straightforward pricing model, and brandish those options like a large stick over your vendor's head. Only you can force the change necessary to bring sanity back to application pricing.

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