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Excerpt from "The Vendor's Guide to Software Licensing and Pricing"

The The Vendor's Guide to Software Licensing and Pricing, a Software Pricing Partners publication, covers the topics below. (The Table of Contents is here. If you want to order The Vendor's Guide to Software Licensing and Pricing, you can order on-line through our secure server or view and print an order form).

• The Issue of Licensing Flexibility
• Who This Guide Is For
• What Type of Products Are Covered By This Guide
• What You Can Achieve By Using This Guide
• A Quick Overview of The Guide
• Table of Contents

The Issue of Licensing Flexibility Top
Customers are rapidly moving from host-based or standalone applications to networked or distributed product architectures. These customers are getting more dissatisfied with vendors who cling to traditional pricing and licensing because these models are breaking down or no longer work.

If your company wants to meet customer demands for flexible licensing, this guide can help you resolve some of the issues and implementation details associated with flexible licensing.

This guide is written with two view points. First, the starting point for pricing software should always be the customer and what they value. Second, networked applications should be monitored and/or controlled via a license manager so both vendor and customer know how much software is being applied to a task.

Who This Guide Is For Top
We have targeted this guide primarily to senior managers of any software company trying to make the transition to flexible licensing of their products. The audience includes CEOs of small companies, VPs of Marketing in mid-sized companies, and Director-level people in large companies.

Other people involved in the pricing-setting process will also benefit from the contents of the guide.

While we provide general guidance useful to anyone involved in pricing software, senior managers should pay attention to the details of the pricing process whereas people that implement the price changes should pay attention to the details in the case studies

What Type of Products Are Covered By This Guide Top
Think of business software applications along a spectrum. At one end are expensive, complex, configurable products sold directly to technically sophisticated customers. At the other end are inexpensive, off-the-shelf products sold through indirect channels to end-users.

We see both of these converging at a point in the middle:

• Network configurable products
• Direct sales for large transactions
• Telesales or direct mail for add-ons
• VAR or partner channels for specialty sales

We have intended this guide for companies whose products run on networks and who do direct sales for their big deals at least -- if not for all sales. We go into considerable detail to help you understand how your company's business model will change.

For companies coming from the shrink-wrapped end of the spectrum, this guide will help you understand the issues in flexible licensing and the new types of shrink-wrapped products that are possible, like monthly or part-time licenses.

We focus primarily on using flexible licensing to meet end-user needs and do not spend much time dealing with flexible licensing of products sold through indirect channels.

What You Can Achieve By Using This Guide Top
Pricing has become more complex compared to "the good old days" (1985?). Until then, the process was simple because the product was simple: one product on one CPU at one price.

As more applications became available on LANs, the model shifted to multiple users accessing one product on one server CPU. Pricing became slightly more complicated.

Now we have client/server architectures, distributed computing environments, and widespread use of LANs. Even the line separating local and remote CPUs has become blurred as more companies use high speed WANs.

As customer requirements and the competitive environment have become more demanding, so has software pricing.

The pricing techniques in this guide comes from thousands of hours of consulting. It can help your company...

• Obtain higher average prices with lower sales effort ... by using proactive pricing geared around customer requirements.
• Compete more effectively ... by using floating or per-user licensing to differentiate your products.
• Become a winner with your customers ... by working through the impact of per-user licensing and pricing on your business model.

1. The Industry Ground Rules Are Changing 
   Background information to help you understand the fundamental changes in the computer industry leading to the push for flexible licensing and why most companies have a hard time making the transition.
   
   

2. Why Companies Must Turn to Flexible Licensing 
   Describes how to give customers what they want (software access) without having vendors give up what they want (predictable revenues). Flexible licensing can be a good deal for both parties.
   
   

3. Use License Managers for Software Control 
   Presents a conceptual overview of license manager technology, the underlying control mechanism for flexible licensing. Describes how to use this technology as a competitive weapon. 
   
   

4. A Simple Example of Per-User Pricing 
   This is a simplified version of how a simple networked application won a sale despite a slight price premium. Introduces the concept of aligning product configuration and price structure with customer usage patterns.
   
   

5. The Network and Client/Server Pricing Process 
   Describes the process of setting prices with a series of practical tips on how to increase an organization's ability to wrestle the pricing issue to the ground -- and win!
   
   

6. Pricing and Configuring a Client/Server Application: An Example 
   This is a case study describing a more complex situation -- a client/server application. The case study runs through the thought processes behind choosing a product configuration and the price structure and levels.
   
   

7. Other Useful Items 
   This section includes information about some "nuts and bolts" issues that didn't fit anywhere else but are too important to overlook.
   
   

8. The Next Software Challenge 
   A preview of the types of architectural challenges that vendors will face when offering products for heterogeneous network environments. We strongly urge vendors to take a series of evolutionary steps so they can migrate their way into the future.
   
   APPENDIX A -- Client/Server Building Blocks
   Here is a framework for configuring client/server products. This framework can also be used for networked applications.
   
   APPENDIX B -- A Useful Benchmark: The OURS Licensing Principles
   One group that has looked at the problem of licensing (mostly) and pricing (a little) is the OURS (Open User Recommended Solutions) Consortium. Their work also provides a mark on the wall to compare your pricing and licensing against.
   
   APPENDIX C -- A General Pricing Primer
   Describes a few of the pricing "tricks of the trade." Offers alternatives to changing prices. Price is one of many product attributes that vendors can change if they want to increase cashflow.
   
   APPENDIX D -- How to Keep New Technologies on Track
   This is an article based on the book Crossing the Chasm: Marketing and Selling Technology Products to Mainstream Customers. The article describes a key concept: The Complete Product.
   
   Table of Contents Top
   The Vendor's Guide is a 60 page, 8-1/2 x 11 inch delivered electronically in PDF format. A detailed Table of Contents can be viewed by clicking here.