What is the price of software?

A year ago I first encountered the way one of our ERP software competitors priced their small/medium business application – it was 30-40 percent lower than the list price we started off with.

At the time, we thought this was an attempt by that vendor to increase market share and wouldn’t last too long. A year down the line, and that vendor is still pricing way lower than we do when we first go into an opportunity. The functionality of both our products is about the same, so I am starting to ask the question “how do the ERP vendors come up with a price for their software?”

Frankly, it seems to be arbitrary. Vinnie at the deal architect discusses this in his “process angioplasty” columns, and reckons that the ERP vendors waste that money on useless overheads. I saw that recently at the Microsoft Open Licensing seminar, when every attendee got a box which the Microsoft marketers thought would be “nice” to help promote their product licensing.

If our competitor, one of the big ERP players, believes they can operate successfully by pricing low, why can’t our vendor realise that? After all, isn’t the main income source the annual maintenance payment rather than the initial software licence?


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