Visiting software pricing models
By John Clingan on Nov 05, 2005
While doing yard work today, I was listening to a Gartner podcast discussing software licensing. I must say that it put software vendors in a rather capitalistic light. Note that my quote is paraphrased (from memory), not a literal quote. âSoftware vendors do not change pricing models to lose money. The two pricing models mentioned were subscription models (software subscriptions) and dual-core pricing, noting that some customers were requesting utility "pay for what you use" pricing. Note to Gartner, dual-core is about to become passe. Customers are going to have to deal with âmulti-coreâ pricing models from software vendors if things don't change.
Gartner mentioned no vendors, and therefore did not mention that Sun is attacking pricing models head on. With our JES pricing model, customers know what they are getting. Not only today, but going forward. $100 per employee per year with a up to a 5% price increase per year. No surprises. That's a software subscription that is predictable. And you get most of the software on the Sun truck. Plus our desire is to make all of our software open source, and with that will come transparency. Again, no surprises.
The podcast also discussed the impact of virtualization on pricing models. While dual-core is passe, so is âcoreâ in general. How much should a software vendor charge for 1/10th of a core? The concept of âper-coreâ pricing has to go. It is becoming irrelevant, so 20th century.
Customers are starting to take notice. I sat in a meeting last week where JES licensing came up. Customers are taking notice of the JES model. Don't fall for vendors giving you a 3 year fixed-price âall software on the truckâ deal to compete with our JES pricing model. Get in writing what happens years 4+.
I'd be interested in hearing about some alternative software licensing models out there. We all know about the âfree-software-pay-for-supportâ pricing model. I'm sure customers would love to pay 30%-of-list-price-support for that Any ideas?