enterprise software pricing: approaching the tipping point for a collapse?
DESCRIPTION
Most software buyers are struggling to achieve a level of effective software usage that delivers promised business results. As visibility into software utilization continues to increase, many software providers will find their license/maintenance prices under immense pressure to decline. While posing a significant revenue risk, proactive software providers can turn this challenge into a new revenue opportunity. Learn the 4 critical leadership acts that software executives must make to maintain sustainable revenue growth.TRANSCRIPT
1
Enterprise Software Pricing:Approaching the Tipping Point for a Collapse?
April, 2008
Chris Dowse
CEO, Neochange
© 2008 Neochange, Inc. 2
Neochange: Adoption SpecialistsNeochange: Adoption Specialists
Enterprise Buyers
Software Providers
Neochange
Management consulting firm exclusively focused on Effective User Adoption solutions for Enterprise Software.
Using our innovative AdoptITTM
methodology we:
� Accelerate time-to-value for new deployments by mitigating adoption risks
� Increase effective usage of existing deployments to improve value realization
� Increase the capability to lead business transformations
© 2008 Neochange, Inc. 3
© 2008 Neochange, Inc. 4
Definition of Software SuccessDefinition of Software Success
N=159
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Successful
Implementation
Software Is Deployed
High Effective Usage
Value Realization
Buyers Providers
© 2008 Neochange, Inc. 5
13%
16%
1%
70%
Process Alignment
Organizational Change
Software Functionality
Effective User Adoption
#1 Driver of Business Value#1 Driver of Business Value
N=159
© 2008 Neochange, Inc. 6
Current State of Effective UsageCurrent State of Effective Usage
0
5
10
15
20
25
30
35
40
45
50
< 15% 15 – 49% 50 – 69% 70% <
Buyer Provider
N=159
% of Respondents
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0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010
Automated SW License Tracking Application Mapping End User Monitoring
Software Utilization TransparencySoftware Utilization Transparency
Enterprise Market Penetration
(Software License) (Forrester)(Gartner)
Shelf-Ware Visibility
Complete Visibility
Critical Application Visibility
© 2008 Neochange, Inc. 8
Buyer Expectation of their ProviderBuyer Expectation of their Provider
5%
48%
47%
Product Expertise Only
Software / ProcessAlignment
Value Enablement
N=159
© 2008 Neochange, Inc. 9
Buyer Willingness to Pay for HelpBuyer Willingness to Pay for Help
N=159
0% 20% 40% 60% 80% 100%
Not Interested Depends on Scope/Complexity Must Have
© 2008 Neochange, Inc. 10
Business Impact of Effective UsageBusiness Impact of Effective Usage
N=159
0 5 10 15 20 25 30 35 40
Information Storage
Governance &
Decision Support
Process Automation
Competitive
Advantage
Buyer Provider
© 2008 Neochange, Inc. 11
Act #1: Rebalance the Investment Portfolio
Act #1: Rebalance the Investment Portfolio
© 2008 Neochange, Inc. 12
Act #1: Adoption PerspectivesAct #1: Adoption Perspectives
Understand the market influences on user adoption and define EUA competition tactics
Understand the alignment of the provider’s approach to managing customers adoption risks and driving effective usage
Understand common adoption risks and leverage points related to the target customer
ProviderProvider
MarketMarket
CustomerCustomer
Domain Domain
MaturityMaturity
Value Value
PathPathService Service
ModelModel
Industry Industry
Standards Standards
Adoption Adoption
DisciplineDiscipline
Value Value
DialogueDialogueOperating Operating
ModelModel
Solution Solution
RisksRisks
Customer Customer
SegmentSegment
Adoption Adoption
RisksRisksBusiness Business
DriversDrivers
Change Change
Capacity Capacity
© 2008 Neochange, Inc. 13
Act #2: S&M focused on Lifetime Customer Value
Act #2: S&M focused on Lifetime Customer Value
Increasing vertical saturation &
competitive functional parity
Return on S&M
Investments
Feature Focus
Effective Usage Focus
© 2008 Neochange, Inc. 14
Act #2: Customer Value PathAct #2: Customer Value Path
FUNCTIONALITY
OPERATIONAL CAPABILITY
BUSINESS VALUE
© 2008 Neochange, Inc. 15
Act #3: Expand Services CharterAct #3: Expand Services Charter
Adoption Readiness Accelerator
Adoption Management Support & Education
Adoption Risk Mitigation Strategy
Enterprise Value Path
Effective Usage Activator
© 2008 Neochange, Inc. 16
Act #3: Expand Services Charter
Act #3: Expand Services Charter
Change Leadership
Deployment
Technical Domain
Organizational Blueprint
Tech Configuration
Integration
Core Product
Business Domain
Usage Domain
USAGE domain is where the organization effectively uses the solution to deliver value:
Change Leadership –compelling vision communications, adoption risk management & governance, stakeholder management, value realization strategy
Deployment – Planning & coordination, user training & development, technical deployment, support structure, rollout strategy
TECHNICAL domain covers customization and core software:
Technical Configuration – Infrastructure preparation, product installation, connectivity, platform settings, performance tuning
Integration – System & data interfaces
BUSINESS domain drives key decisions that underlie organization & application design:
Data Models – Decision-making, reporting
Processes –workflows, procedures, controls
Organization Structure – Functions, managers
Decision Rights & Authority – Approvals, access
© 2008 Neochange, Inc. 17
Act #4: R&D towards UsabilityAct #4: R&D towards Usability
Degree of Usage Gap
Return on R&D
Investments
Feature Innovation
Usability Innovation
© 2008 Neochange, Inc. 18
Act #4: Expectation of Existing Customer
Act #4: Expectation of Existing Customer
19%
21%
13%
47%
New features/functionality
Upgrades/Upgradeability
User Skill Development
Enabling Better Usage
N=159
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Sustainable Revenue Growth from Adoption Strategies
Sustainable Revenue Growth from Adoption Strategies
Maintenance
Renewals
Maintenance
Prices
License Footprint
Expansion
Value Assurance
Services
Revenue Generation
Revenue Protection
© 2008 Neochange, Inc. 20
Presentation SynopsisPresentation Synopsis
Most software buyers are struggling to achieve a level of effective software usage that delivers promised business results.
� As visibility into software utilization continues to increase, many software providers will find their license / maintenance prices under immense pressure to decline.
� While posing a significant revenue risk, proactive software providers can turn this challenge into a new revenue opportunity.
� 4 critical leadership acts that software executives must make to maintain sustainable revenue growth.
© 2008 Neochange, Inc. 21
Questions?Questions?
Contact Details
415-823-7549
www.neochange.com