1 / 20

National Technology & Business Conference

Emerging Trends in Pricing & ROI. Jeff Nolan Teqlo (USA). National Technology & Business Conference. 29 November 2006. About me. CEO of Silicon Valley startup Teqlo, Inc. DIY application technology SMB focused SaaS dependent Previously with SAP Attack Oracle Competitive Strategy Team

diamond
Download Presentation

National Technology & Business Conference

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Emerging Trends in Pricing & ROI Jeff Nolan Teqlo (USA) National Technology & Business Conference 29 November 2006

  2. About me • CEO of Silicon Valley startup Teqlo, Inc. • DIY application technology • SMB focused • SaaS dependent • Previously with SAP • Attack Oracle Competitive Strategy Team • 8 years with SAP Ventures • SAP’s venture capital fund National Technology & Business Conference 29 November 2006

  3. Pricing Strategy • 2 purposes to pricing • Accommodate 100% of demand in your shooting range • Maximize unit economics • Additional benefits of perfect pricing • Competitive weapon • Better forecasting as a result of less discounting • Valuation of the business improves National Technology & Business Conference 29 November 2006

  4. Put another way… • Lose no deals because of price • Leave no money on the table • Force competitive price moves • Happy investors National Technology & Business Conference 29 November 2006

  5. Major Trends in Pricing • Move from licenses to subscriptions • Not as prevalent as some would suggest but significant nonetheless • Moves software from Capex to operating expense on the customer side • Non-traditional models • Free software • Open source or ad supported • Diversification of revenue streams • Convergence of enterprise and consumer markets National Technology & Business Conference 29 November 2006

  6. Old Software • Ideal • List price based on combination of server and client licenses • 18-22% maintenance and support • Reality • Every deal negotiated • Deep discounting • Back end loading of the quarter • Maintenance ends up being the dog instead of the tail • Oracle’s acquisitions value companies at 3.5-4x as a whole but 6-8x for maintenance dollars National Technology & Business Conference 29 November 2006

  7. New Software Pricing Rules • Multiple pricing strategies • SaaS : • Monthly subscription based on number of users and/or employee records • Pay as you go, no upfront costs • On Premise • Deeply discounted license • Premium maintenance up to 25% • The appliance emerges as prime delivery model • Freemium • Basic service is free • Premium service components at additional charge National Technology & Business Conference 29 November 2006

  8. “Safe Passage” Pricing • Competitive switching opportunities • 75-100% of the competitive licensing cost is rebated • Premium maintenance on the adjusted base • Applicable in markets that are mature and competitively stable • 3 Laws of Siege • Fatigue • Starve • Demoralize National Technology & Business Conference 29 November 2006

  9. Open Source • OSS used to be the same as free software • Commercially unviable • New rules force attribution and enable premium pricing options • Core product engine is downloadable • Premium add-ons (e.g. Exchange integration) are extra • Software cannot be combined with another product and converted into a commercial offering • License kicks in under specific conditions National Technology & Business Conference 29 November 2006

  10. SaaS Pricing • Monthly subscription charge • User based • Salesforce, $50 per month for 5 users • Intuit Quickbase: $250 per month • Joyent Connector (messaging): $15 per month • Feedburner: $6.95 per month • Backpack: $15 per month • Employee based • Workday: $x per employee record • Basic support, web only • No customizations but that is changing National Technology & Business Conference 29 November 2006

  11. SaaS Pricing • Premium pricing options • Telephone support • E-learning and consulting are extra • Appexchange is a platform play and seeks to grab more wallet share from customers by introducing partner products • This option is highly attractiver to 100-250 employee firms that have no IT capability and are comfortable hosting data in the cloud • Have little ambition for custom software National Technology & Business Conference 29 November 2006

  12. On Premise Ownership • Not really ownership but it feels that way • For 500 users and up this option does provide stronger ROI • In spite of implementation risks, integration risks, project scope risks • Assumes moderately frequent upgrades • Assumes 10 year replacement cycle • 2,500 user organizations behave similarly but at much larger scale National Technology & Business Conference 29 November 2006

  13. Hybrids • Even large organizations see SaaS as an attractive option for enabling subsidiaries and remote locations • In even the largest organizations it is financially beneficial to have SaaS when • 25% of the employees are remote • Operating in multiple geographies • But pricing and deployment options are apples and oranges National Technology & Business Conference 29 November 2006

  14. The “Departmental Sell” • Many companies believe they can circumvent IT by going directly to users • Requires a modest monthly charge • Must be hosted • At some point, if successful, the CIO realizes that there is a lot of XYZ being used and forces a consolidation rollup of licenses • Often wants to bring it in house National Technology & Business Conference 29 November 2006

  15. Appliances • Preconfigured software on commodity hardware • Socialtext’s wiki appliance • Turnkey, plug it in and give it an IP address • $50,000 for unlimited use • Support is extra… • Sun is doing this with their new storage offerings • SAP is doing this for BIA • Turnkey BI appliance preintegrated with SAP and non-SAP systems • Google Search Appliance • Oracle and SFdC integration out of the box National Technology & Business Conference 29 November 2006

  16. Big Enterprise Consumer M - SMB S - SMB Consolidation License Premium/Service Premium Free’ium Multiple options Free Service Premium Premium ++ Premium / ProServ Free Teqlos Expanded Teqlet Library Integration Options Compliance Limited Teqlets No Advertising Security / LDAP On-Premise Deploy Limited Storage Company Skins Proprietary Teqlets SAP/Oracle Integration Inline Advertising @yourdomain.com Exchange Messaging Expanded Support Flexible Workflow Compliance Auditing Site Licensing BizTalk Integration SNMP Support Premium Service More Teqlets Additional Storage Limited Advertising Personalization National Technology & Business Conference 29 November 2006

  17. Advertising • I don’t get this… • Requires high CPMs to make money • Dedicated ad sales business unit for sponsorships • Google AdSense isn’t going to pay the bills • However… Federated Media is interesting National Technology & Business Conference 29 November 2006

  18. Hosting Economics National Technology & Business Conference 29 November 2006

  19. Infrastructure Services • Emergence of infrastructure in the cloud is a major trend • Amazon S3 • Amazon Fulfillment Services • .50 cents + .45 cents per lb. per item • .45 cents per cubic foot per month for storage • Joyent’s storage service • 100gb of storage • 5gb network bandwidth per month • $199 a year • Sun storage arrays and CPU farms National Technology & Business Conference 29 November 2006

  20. Thank you National Technology & Business Conference 29 November 2006

More Related