Forrester just released a report that should be required reading for enterprise software vendors who insist on inflicting the 20th century on their customers. According to Forrester, "software licensing and pricing continues to be marred by complexity, soaring maintenance costs, and a lack of flexibility and alignment with business goals."
In the French version of the synopsis, Forrester gives even more detail. For those of us who compete with these bloatware kings, this isn't news. But for enterprises who haven't been on a buying spree lately, you're in for a rude awakening:
- Software vendors are adding even more complexity to their pricing/product portfolios to blur/avoid comparisons with other vendors (and thereby keep prices high for as long as possible);
- Proprietary enterprise software vendors are now giving significant discounts on license fees while raising maintenance prices;
- Maintenance costs are going up to 25 to 27 percent of license costs (instead of the old standard of 18 to 25 percent);
- Microsoft's downloadable price book is 100 pages long...and that's just the start of what you'd have to read to understand licensing rights, etc.
These aren't signs of robust, happy vendors. These are signs of vendors getting the snot kicked out of them by customers fed up with exorbitant pricing that has no material connection to the value that a vendor actually provides a customer. It's also a sign that software as a service and open source are having a serious impact on enterprise software pricing, forcing proprietary vendors into a retreat.
What enterprises need to understand is that the pricing conversation should always start at $0.00. That license fee the vendor is discounting? It's a fraud. It is Monopoly money and rightfully should get pummeled down to $0.00.
The conversation should start with the support and ongoing maintenance value that the vendor provides, without any tricks as to paying more for upgrades and whatnot. Customers deserve ongoing value from their vendor. This includes support and it includes ongoing innovation. It's time to give enterprise software a massive kick in the rear-end and force it to serve customer needs again.