Wednesday, January 26, 2011

Duncan Jones of Forrester on Pay-per-use Software Pricing

Duncan Jones of Forrester Research focuses on software pricing and licensing and helps clients understand and address the effect of technology changes on software contracts.

Pay per use provides flexible, on-demand services, suitable for temporary needs, but is not suitable for regularly used applications. Jone's concerns include:

  1. Complexity to define and track. How to measure time-based or transactional usage reliably?
  2. Unpredictable and uncontrallable. How to prevent an unexpected, unbudgeted bills at the end of the month?
  3. Expensive. Some people assume that it'll be cheaper if they only pay for what they actually use. That's an incorrect assumption. The per hour rate will always be sufficiently more than the per year rate to push customers to the latter. Price is driven by negotiation leverage and competition, not the licensing model.
  4. Counter-productive. Software vendors want people to use the tools you've made available, so why create a cost disincentive by making customers wonder, before starting an application, "How much will this cost?"

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