Accenture Whitepaper Tackles Software Pricing Challenges

Software pricing is an area of much debate as software providers are battling more than just standard competition. These companies are struggling to grow organically, combating client’s reduced purchasing budgets, facing an economy in a slump, and competing with the growing strength and popularity of the SaaS model.

 

In a recent report by Accenture (News - Alert), “Software Pricing: Getting Back to Growth”, authors John Hanson, Sarvanja and Raymond Florio report on trends that are thought to be worrisome for this industry, according to a blog by Joseph Tartakoff in the Seattle Tech Report.

 

The report found that while software providers are able to drive revenues, they are doing so by offering sharp discounts as high as 70 percent off the list price. The report also noted that there are increasingly thousands of stock keeping unites (SKUs) for each product, which makes it difficult to adjust prices quickly.

Such a situation means that it could be the end of the next closing period before company executives know what the actual sale price was in a sale, how deeply options were bundled or discounted or what other concessions were made to close the deal. While this approach may seem necessary to the sales professional, it dramatically impacts the ability for the company to drive profitable growth.

According to the findings in the report, there is no one single cause behind the pricing problems within this sector. Instead, these companies are operating in a maturing industry with skilled negotiators in purchasing positions; facing increasingly aggressive competition; and new business models such as SaaS (News - Alert) that are impacting sales and growth.

 

Analysts with Accenture point to substantial opportunities for pricing to drive top-line growth in a post-boom software market. They recommend well-planned pricing strategies and execution by proactively reworking pricing and licensing policies. Vendors should also look to segmentation as well as listen to their customers.

Accenture identified three main areas where software vendors are struggling with pricing: product managers and marketing managers are hard-pressed to make smart decisions about pricing setting; the soaring difficulty of price administration and publishing; and the formidable challenges to the mechanics of sales activities.

To combat these challenges, Accenture recommends considering certain emerging solutions that are being identified as key best practices:

 

The challenges that are plaguing the industry today are not likely to quickly go away, but software companies can embrace these changes and turn them into opportunities for profitable deals. The right approach and the right mindset could make all the difference.