Enterprise 2.0's pricing model is open source 1.0

A novel way of pricing enterprise 2.0 software like Twitter-for-the-enterprise has a long pedigree--in open-source software. Start with a superlow up-front charge, and scale up.

Schlumberger manager Julien le Nestour offers an innovative new pricing model to drive "enterprise 2.0" software like Twitter-for-the-enterprise: instead of offering volume discounts, start with a superlow up-front charge, and scale up fees as more users start using the software.

I have news for Le Nestour: enterprise IT already has this pricing model widely in use. It's called open source.

Reading Le Nestour's description of his proposed model sounds exactly like the pricing models used by Openbravo, Pentaho, Alfresco, Hyperic, and others:

Instead of charging less per user, as more accounts are purchased, vendors should charge more as more accounts are purchased...Using a volume-increasing scheme would accelerate customer acquisitions, new pilot projects, and the number of deployments that could potentially scale.

Vendors should provide very low entry points, charge for setup and deployment at cost, and let the users themselves prove the value of their services. Vendors would not incur additional costs because sales would be quick, and deployment would be sold at cost (which for software as a service is minimal)...This approach would also help define the value of an application: the vendor that is confident that an application will spread, once deployed within an organization, projects a different image than the one that tries to lock in all revenue up front, no matter whether deployment is successful or not.

Agreed on all counts. Open source derisks IT investments for enterprises and, going one step further than Le Nestour's recommendation, prods open-source vendors to continually innovate and deliver value to customers through a subscription model that allows the customer to walk (but keep the software), if the vendor fails to provide adequate value through support, software upgrades, and other processes.

Le Nestour suggests that the "potential is big" for his idea. I couldn't agree more. I just wouldn't call it new. We've had open-source pricing models for many years now, and they're paying off in spades for the companies that use them.


Disclosure: I work for Alfresco and am an advisor to Openbravo.

Follow me on Twitter at mjasay.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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