Software Application Producers Are From Mars – Enterprises Are From Venus?

The value perception gap that exists between software buyers and sellers could explain, in part, the growing diversity of software pricing and licensing models being demanded by enterprises – and offered by software application producers. Nearly one quarter (24%) of software application producers surveyed (in Flexera Software’s 2012 Software Pricing and Licensing Survey, prepared jointly with IDC) believe that their licensing and pricing strategies are either ineffective or very ineffective in capturing the true value they deliver in their products. In contrast, enterprises indicated most frequently they are either unsatisfied or very unsatisfied with the price-to-value of their ERP software (25%), database software (22%) and CRM software (20%).

The survey also highlights how software application producers are changing their licensing and pricing strategies in order to strike the difficult balance between maximising revenue streams and increasing customer satisfaction. 42% of software application producers reported that over the past 18-24 months, their software pricing and licensing strategies have changed. The most cited reason for the change was to generate more revenue (69%), up from 40% in 2011. Other reasons cited for the changes were to improve customer relations (44%), to accelerate sales cycles (35%) and to enter new markets (28%).

The survey points to a definite shift in usage-based licensing, with a predicted 23% increase in the next 18-24 months, as software companies correspond to the demand for more flexibility in the way their enterprise customers want to consume software. These changes are occurring across the industry and could ultimately help close the software value perception gap.

“There is a wide spectrum of software pricing and licensing models that software application producers can choose – from perpetual licenses to usage-based pricing models,” said Steve Schmidt, Vice President of Corporate Development at Flexera Software. “By building pricing and licensing flexibility into their products – they can very easily package and price their software tailored to the changing needs of their customers – and as a result both increase revenues and customer satisfaction. This survey shows that we are seeing this begin to happen – the result of which will ultimately narrow the software value perception gap that exists today.”

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