August 15th, 2008
Implementation complexity enables higher software prices
According to an interesting post in CIO Magazine, recent price increases by both SAP and Oracle were made possible by implementation complexity and the difficulty of replacing existing systems.
CIO explains:
[O]ne of the complaints customers have about these products is the huge implementation costs of putting them in. Said a different way, they’re so complex that very few companies can afford to take on the cost of getting them installed and working. Consequently, reducing prices on the software probably wouldn’t grow the customer base, because most companies can’t afford the total cost of owning them.
In other words, enterprise software customers believe they have few choices and therefore willingly pay whatever vendors ask. For their part, software suppliers are aware of this dynamic and take full advantage of their incumbent position.
It’s a one-sided perspective but compelling nonetheless.
[Image via Univ. of Warwick]
Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures. Click here to discuss this post with him on Twitter.
See his full profile and disclosure of his industry affiliations.
