Pricing For Enterprise Software Solutions

In my line of work I deal with buyers from purchasing departments of multinationals requesting pricing for enterprise software solutions. Supplying a price is often a little more complicated than looking it up on a price list. In reality it involves a lot more.

Before supplying a price to the buyer, it is essential to understand  their business requirements for the software solution. What follows is a scaled down version of the entire process followed for every enquiry.

Understand Business Requirements

To understand the business requirements a series of meetings are held with all the business stake-holders involved. During this process the business problem(s) are documented and possible solutions noted. Meetings are also held with stake-holders from the IT department to obtain their input and discuss the current hardware configuration and surplus capacity within the organisation.

All too often the IT department is classified as a cost centre and not a business unit. When this happens they are frequently never consulted about future software solutions to be purchased. This often results in projects running out of time and over budget. Fortunately this view is changing and we are seeing more organisations that accept IT as a business unit contributing to the value of the organisation.

During discussions with the IT management and business stake-holders licensing of the solution is worked out and the following information is noted.

  • Number of technicians that require access to the solution
  • Number of PC’s, laptops and servers used in the organisation

  • Hardware requirements for the solution and the cost estimates to purchase the hardware.

  • Enterprise solutions are modular. During these discussions the business stake-holders elect the required modules.

Hosting Solution

Many of the large enterprise solutions are now being offered as a cloud based solution, eliminating the need to purchase costly hardware and operating systems. However, cloud based software solutions are not accepted by many companies for security reasons. In some cases organisations do not want a third party managing their data while others are more concerned with the fact that their data is being stored on servers on another continent.

The anti-cloud lobby is still very strong and all the major software vendors are aware of this. Therefore, they support solutions that target both segments of the market.

Hidden Agenda

During the meetings with the business stake-holders hidden agendas are often uncovered. A prime example of a hidden agenda involves business managers from different divisions favouring products because they have used them before, instead of selecting what is best for the entire organisation.

Another example of a hidden agenda is the practice where managers vote for a given solution for company political reasons to further their career instead of selecting what is best for the organisation.

Budget Availability

Now that the vendor has all the business requirements for the solution he is able to work out a provisional cost for the software. He will also include his professional services to install and configure the software and train the users of the software. Additional costs may also be added for the migration of data from the old system to the new solution.

Solution Selection Process

The solution selection process is a very busy time for the teams assigned to the products that reach the short list. During this phase the following processes need to be completed before the final solution is provisionally selected.

  • Evaluation of the solutions that made the short-list.
  • Document advantages and disadvantages in terms of the business requirements.

  • Documenting the hardware and software requirements for the solution.

  • Call for quotations.This is the first time that pricing for the solution is supplied.

  • Prepare and submit a proposal.

  • Solution presentation by the vendor.

  • Final Solution Selection

    The final solution selection is normally done at board level after the business stake-holders have given their input. This is a process that can take a few days or extend over a period of months. Further delays can be caused when budgets for the new solution are only available in the new financial year.

     

     

     

     

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    3 comments
    1. Great Article..After months of study….I have seen the “wrong” software chosen because of political reasons…Sure did disgust me….

      Liked by 1 person

      • Hi prayior. I have been on the wrong side of “hidden agenda’s” and it is not pleasant.

        Thank you for posting your comment and I am pleased you liked the article.

        Liked by 1 person

        • LOL…seems I am almost always on the wrong side of the agendas of others! You are correct…it is NOT pleasant..and I did like the article. I like how you write! Not to mention it was very informative! Have a great weekend!

          Liked by 1 person

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