CIOs clamor for usage-based pricing

Vendors eager to keep mining today's rich vein of upfront licensing revenue may resist the move. however

Sick of overpaying for features they don't need or use, enterprise software customers are eager for vendors to adopt pay-per-use models that better align cost with consumption, according to an IDC report published last month.

Vendors that are eager to keep mining today's rich vein of upfront licensing revenue may resist. But they risk losing customers to software-as-a-service providers like Amazon.com Inc., which offer pricing schemes closer to true pay-per-use models, IDC said.

"Customers believe they have been forced to buy more software than they need or use," wrote IDC analyst Amy Konary. This creates a "value disconnect" that isn't alleviated by heavy discounting, she said.

Konary argued that vendors should move to pay-per-use models, under which they will have to do more to make sure customers are satisfied, and "where real value is in the ease, intuitiveness, and seamlessness of the experience."

She compared it to the music industry's shift from selling CDs to selling individual songs to customers, who are now empowered by software to manage their music collections the way they want to. She also likened it to Amazon's Web-based storage service, EC2 , which lets companies host their own software and pay for it based on the number of application-hours used.

That's not true usage-based pricing -- users pay the same rate whether the app is heavily or lightly used -- but it allows customers to "purchase at a more granular level than was previously possible," Konary said.

Vendors are justified in fearing they would lose revenue from usage-based pricing, she wrote, but CIOs want assurance that costs won't suddenly spike as a result of unexpectedly heavy usage. A compromise would be the kind of tiered pricing used by cell phone carriers, Konary said.

This version of this story was originally published in Computerworld 's print edition. It's an edited version of an article that first appeared on Computerworld.com.

Read more about software in Computerworld's Software Knowledge Center.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags pay-per-usepricing models

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Eric Lai

Computerworld (US)
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?