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Forrester: Vendors showing more price flexibility

Software vendors have been obliged to be more accommodating on pricing with their customers as a result of the economic crisis, according to a new study
Written by Matthew Broersma, Contributor

Software vendors are becoming more accommodating on pricing with their customers as a result of the economic crisis, according to a report from Forrester Research.

The Enterprise Software Licensing And Pricing Update, Q2 2009 study, published on Monday, examined the way pricing and licensing strategies at 12 enterprise software vendors changed between the fourth quarter of 2008 and the first quarter of this year. It found that vendors are generally being more flexible at the negotiating table, especially with new customers.

As an example of this, the report's author Ray Wang cited SAP's deal in April with the SAP User Group Network, in which the software provider agreed to meet a set of key performance indicators (KPIs) before it could increase support fees.

"This shows the importance of preserving independent user groups and the role active users play in shaping the overall agenda," Forrester analyst Wang wrote in a blog post on the agreement.

Wang said that while the SAP deal has not led to a wave of similar agreements, it shows how vendors are being more flexible, particularly with new customers.

Other companies have made moves intended to clarify pricing or give customers more for their money, Forrester found. Daltek, which makes software for project-oriented businesses such as construction and aerospace, has simplified its pricing bundles and has standardised its maintenance and support fees, Forrester said. In addition, Oracle has published its price lists and a software investment guide to clarify its pricing to customers.

Another example is Lawson Software, which has added a 24-hour support plan. Microsoft has introduced a premium support scheme called Premier Mission Critical Support, as well as multi-year payment plans for Dynamics CRM and ERP applications, Wang said.

Other organisations have also recognised that buyers currently have greater negotiating power with technology providers. In May, UK IT industry body Intellect called for wider use of what it calls Outcome-Based Agreements (OBAs), a relatively new type of contract that binds suppliers to provide particular business results — and not just a service or product. Such contracts are the way of the future for private- and public-sector bodies with ever-shrinking budgets, Intellect argued.

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