Software Subscription Prices

In the earlier blog entry entitled, Monetization:  How is it affecting your business?, we noted that many organizations are choosing to forgo internal hosting for subscription services.  This can be tremendously cost-effective for many businesses and organizations.  However, a hardnosed examination is advisable, instead of taking it for granted that the value proposition is straightforward.  We have seen a few companies make commitments that land them in a much higher cost bracket than they anticipated – putting them into an awkward position of deciding whether to continue to pay, or to scramble for an alternative.  Often the price structure features a “loss leader” that can quickly become very expensive.

There are real business decisions here.  The value proposition for these services is real, but there are times and places for various options.  Sometimes an expensive option may be reasonable in terms of total cost of ownership during a period of organizational development, but at some point the cost-benefit analysis may point to a different approach.  Also, a subscription offering may be surprisingly affordable for certain features and services, but more expensive for others.  Different offerings, even from the same company, may not be equal bargains, so it is smart to be selective.

Price differences can sometimes be almost hard to believe. For example, Microsoft has been promoting its cloud office/SharePoint products, BPOS, and the latest incarnation, Office 365.  Recently they announced a 92% reduction in the monthly fees for data storage, from $2.50 per gigabyte to 20 cents in the enterprise versions of Office 365! Purportedly they did so to speed acceptance of the platform.  While this is great news for the customer, it illustrates the wide range of cost and value out there.  Also, it is often not that easy to find what the actual pricing is going to be, especially when it is high.

Subscription services are a fact of life in today’s world, but, caveat emptor, the shrewd customer will concede the value of due diligence and careful inspection of the current terms as well as the price, terms, and options for upscaling.  Again, no one size fits all.  What works for one organization may not work for another, and it is worthwhile to review and amend the arrangements as internal conditions, price structures, and options change.

Copyright © 2011-2012 Patrick D. Russell
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