Pricing metrics and the customers that suboptimize them

6 08 2009

There are many truths in life.  If it didn’t sound so geeky and pessimistic, I would add to the list “customers will always suboptimize your product based on your metrics.”  It’s not very catchy.

I previously wrote about points to consider when choosing your metrics.  It was by no means exhaustive, but it did have a “salesy focus”.  That’s because your sales people play a vital role in your pricing and licensing scheme both before it is rolled out and when their boots hit the ground (and I saved one harsh reality for the end of this post).

Additionally, I brought up a few “rules” (or at least observations I’ve discovered) about choosing your metrics.  I could have added suboptimization to the list, but I’ve found there are some finer points to consider about this psychological pattern when it comes to your software’s sales, adoption, deployment, and expansion.

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Economic necessity: where have all the users gone?

14 04 2009

Now is the time for vendors to seek out their buyers and users (and know the difference).  Grassroots user support helps keep a vendor’s platform relevant and endorsed as critical infrastructure.  Vendors that take an active role in assisting users will also make users shine and avoid “going legacy”.

The strategy is simple to articulate, but hard to deliver: change the argument from “cost savings” to “new value” as easily as plausible.

Keep in mind that vendors also need to show momentum to buyers.  By acknowledging appropriate compatibility and buzzwords surrounding their product, they stay viable from a customer-funding standpoint.

User shrinkage

Layoffs have many layered, long term effects.  Users and buyers at customer installations will be faced with some very difficult and immediate cost-cutting decisions.

For software companies, that means familiar users and buyers may disappear or “go dark”.  This triggers a cycle which could slow software releases or cause product stagnation.  None of this helps the case for software upgrades or roll-outs.

Savings as a Service?

During cost-cutting season, users will look under every rock for opportunities to keep their teams employed and food on the table.  If users look under your “rock” and find a shiny new replacement technology with promise, you’ve got problems.

Everyone’s heard of “the cloud” right?  Vendors offering tangible, useful services in the cloud may help IT staff and users alike carve out narrow savings and innovation opportunities.

Software as a service (SaaS), Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and even Datacenters as a Service (DaaS?) have all received  much attention in the recent past (much like SOA used to).  Heck, I even wrote a couple articles about SaaS and manufacturing in 2008.  The cloud is now chock full of capable, credible options.

Remember: upgrades are ugly, so if the cloud fixes a problem appropriately, it’s on the table.

However, disrupting the status quo is a difficult decision.  The switching costs associated with swapping out an existing application or infrastructure may be too great to undertake as customer staff and support wane.

But trading on fear, uncertainty and doubt is not the answer.

Get tangible before the pressure builds

Immediate value is something vendors need to demonstrate hand-in-hand with users to maintain relevancy.  Working with customers early to understand their objectives can keep their user support base on staff while uncovering new, valuable opportunities.

Know your landscape: vendors threatened by the cloud or that lack a “cloud positioning strategy” had better create one. 

Adopting a proactive stance may turn a potential liability into an asset and transform a “cost savings” argument for displacement into “new value” built on existing assets.