The future of software pricing excellence
An introduction
The shift in enterprise software sales from license to services is amongst the most dramatic and traumatic upheavals in the technology industry.
2011 XaaS services revenue
The new state of the art
The current state of pricing in the software industry is, to put it mildly, chaotic. Whilst many industry leaders realise their pricing is suboptimal, they don't know how to fix the problems.
Optimal pricing requires multiple inputs
The future of software pricing excellence: SaaS pricing
Pricing management is key to making a successful transition to the SaaS business model. PwC has identified the characteristics that define the leaders, laggards and mainstream practitioners of SaaS pricing.
SaaS pricing
The future of software pricing excellence: Transaction pricing management
Businesses with high profit margins are tempted to offer substantial discounts to capture new customers or keep current ones when faced with competitive pressures. This is an especially important issue in the software industry, where discounting off of the ‘list’ price of as much as 100% is common.
The role of a centralised pricing organisation
Key findingsThe key factor separating industry leaders in transaction pricing management from the pack is a fully integrated, cross-functional approach that captures and leverages data about past deals to inform future deals.
A well-defined price waterfall provides the framework to manage price discounting and shape customer buying behaviour.
Without policy, governance and enforcement, it's impossible to realise the full potential value of a price waterfall framework and the metrics and analytics it generates.
By investing time and effort up front in careful design, software vendors can turn transaction pricing management into an engine that preserves or expands margins, encourages future revenue growth, and increases the ease of doing business.
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