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INSIGHT: Only you can change your software pricing experience

INSIGHT: Only you can change your software pricing experience

"In the software industry, pricing is equal parts science and art, and software customers play an essential role in shaping their own experiences."

In IDC's 2015 CXIT Survey, 809 respondents were asked to rate the major tasks, reasons, or interactions through which customers engage with vendors.

The number one interaction, higher than support questions, contact centre, or even sales-- is pricing. In the software industry, pricing is equal parts science and art, and software customers play an essential role in shaping their own experiences.

The typical software customer experience begins with a license negotiation that is about as fun as buying a used car.

At least in the case of the car, the consumer has information that they can use to figure out if they are getting a good deal.

Very few enterprise software providers that publish a price list, and customers end up believing that they pay what they can negotiate.

Once the software is implemented, the customer must manage the software licenses and stay in compliance with the agreement. The average customer will have hundreds, if not thousands, of software contracts to manage.

The terms are almost always different and complex to understand.

This analyst is often asked to assess which software producers offer customers a good software pricing experience, and which ones do not. It isn't as simple as putting companies in a “good” or “bad” column.

Companies with a large and broad software portfolio can be more challenging to buy from simply because they have a lot of products to offer, many with licensing terms that differ due to merger/acquisitions, market conditions, and unique requirements across a vast set of functionality.

In addition, some companies offer more flexibility in how they price for customers, such as metrics that measure value for a specific user role, or a user in a vertical industry.

Some software producers create license types at the request of their customers. While this kind of flexibility is almost always in response to customer needs, it leads to complexity that negatively impacts customer satisfaction. From here, the road back to simplicity can be a long one.

Software audits are also a part of the customer's software licensing experience.

While software providers believe that education is the best way to help customers navigate complexity and manage their software licenses effectively, the reality is that audits can and do happen.

All of the largest software companies have the contractual ability to audit, most do, and the number of companies outside of the top 10 that regularly audit is increasing.

In almost every case where an audit is initiated, compliance issues are found. Software vendors will not disrupt a client's business unless they are fairly certain that there is a problem, and therefore they look for red flags.

These include merger and acquisition activity, contract expiration dates, virtualisation initiatives, and other major impending events. Dynamic environments — such as those where servers are frequently reimaged — can often be host to compliance issues.

Another factor that vendors consider is the degree to which there are controls in place to prevent unauthorised use.

Many ISVs do not want to "lock down" their products because they don't want to inconvenience or send the wrong message to their honest customers. ISVs may then focus their audits on products that have very little license enforcement (other than contractual restrictions) where it is easier for customers to run into compliance issues.

Software negotiations and license audits are a part of the enterprise software landscape. While these events may never be delightful for customers and software producers alike, there is much that can be done to make the software pricing experience a more favourable one.

Software customers play a role in shaping their own experiences, and will need to make compromises in order for these to improve.

For example, they should resist the urge to ask for special terms in every negotiation. In many cases where customers find software pricing too complex, the very terms that confound them were created for them in response to a request for custom flexibility.

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