tag:blogger.com,1999:blog-9158842178911836730.post8922778657121955096..comments2023-02-27T03:51:04.375-06:00Comments on The Marketing Mélange: Why On-Premises Business Software Vendors Should Give Their Products AwayAnonymoushttp://www.blogger.com/profile/03967013949811058601noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-9158842178911836730.post-1202652699138487172009-10-16T11:46:31.594-05:002009-10-16T11:46:31.594-05:00I received this comment via email from someone who...<b>I received this comment via email from someone who wishes to remain anonymous:</b><br />I read with interest your blog today since I think the idea of giving the licenses away for free has tremendous merit, but I do have a fundamental question. Don’t all your arguments from the previous week (when offering CRM for free with ERP) also apply if you offer all the software for free? For example, <i>“The vendor is debasing the product they’re giving away by openly declaring that it has no license value”</i>.<br /><br /><b>My response:</b><br />Good observation and question. The difference IMO is that selling one product and giving another product away, debases the value of the product being given away – it’s a declarative position that a vendor is attaching zero value to a product in comparison to others. However, if all products have no initial license cost, it reflects a completely different business model of how value is delivered to customers and revenue is generated. Therefore, all products are delivered on the same basis in a new delivery/pricing model and none are debased relative to others.Anonymoushttps://www.blogger.com/profile/03967013949811058601noreply@blogger.comtag:blogger.com,1999:blog-9158842178911836730.post-72183131814406230582009-10-15T23:32:55.635-05:002009-10-15T23:32:55.635-05:00Mike,
Great discussion. Certainly from an economi...Mike,<br /><br />Great discussion. Certainly from an economics perspective I agree with your premise. I think if you look at the cost structure of these same companies you will find while they spend 20 - 22% on marketing, most of that is in headcount. They would dismantle the revenue supporting part of their business (the sales teams work as hard as anyone) and they still wouldn't deliver the value that you call for in your creating value for customers link. Their revenue on services pales in comparison to the revenue earned by the Systems Integrators of the world. The ecosystem is incestuous and the customer is left wanting. So free or not, the software's value fails to deliver 93% (CIO.com) of the time. Customers only think they get 68% of what they paid for on an enterprise project. <br /><br />20 years ago, when the core architecture of these systems was built, the problem was caste. The market need they responded to was the need to consolidate operational control. Primarily from a financial perspective and some from a manufacturing/scheduling perspective. A lot of their customers had non-integrated applications that were adjacent to each other causing redundant data and duplicate effort. Complex, large scale applications that consolidated control was the seeming answer. For the last 10 years we have seen the impact these systems have had; good for the software companies and services companies, bad for the customer. <br /><br />So, yes, free would be better. But it still leaves the value question on the table.<br /><br />SteveSteve Christensenhttp://www.babblewareinc.comnoreply@blogger.comtag:blogger.com,1999:blog-9158842178911836730.post-19720116557198573622009-10-15T10:26:12.932-05:002009-10-15T10:26:12.932-05:00Mike,
You suggest an interesting pricing strategy...Mike,<br /><br />You suggest an interesting pricing strategy. Thinking about it, I asked myself what anchors the traditional on-premise software developers to their current model?<br /><br />The financial reports you mentioned could be one piece of it. Traditionally, these companies have been judged on the ratio of license to services and maintenance. Too little license revenue could spell trouble. Of course, that may just be a matter of retraining the market.<br /><br />Then, of course, there are those companies that sell products through a reseller channel. Some of them make their living (not usually the successful ones) off of license revenue. The vendors need these feet on the street to help them sell product, but I think you could tackle this issue by changing the way these VARs are paid. SaaS vendors are already trying to tackle this so I’d take a close look at how they are handling channel sales compensation.<br /><br />Very interesting challenge to wrestle with, isn’t it?<br /><br />All the best!<br /><br />MelissaAnonymoushttps://www.blogger.com/profile/17975146450107615036noreply@blogger.com