August 5th, 2005
Software industry disruption
Over at Loosely Coupled, Phil Wainewright has picked up on our recent piece on outcome-driven software pricing. He notes that, "Vendors get understandably excited about the technology they have on offer, and eventually a whole ecosystem of sales and marketing teams, industry analysts, journalists and technology-focused buyers ends up getting totally absorbed into a closed debate about which product, system or architecture is better than another."
However, Phil shares our view that current software pricing models can’t last. As he explains, "Emerging service-oriented architectures and grid computing will soon make processor-based pricing universally untenable."
Interestingly, he goes further to Richard Veryard at CBDI on "Service Economics." Veryard believes service-oriented models will thoroughly disrupt "resource-based" and "input-based" software pricing models: "For the service economy, output-based pricing makes much more sense. Consumers pay for what they actually get, rather than what the service provider uses. There are various ways of calculating this, at different levels of granularity, with different distribution of risk."
I encourage you to read Phil’s whole article. He points out that great companies have always taken responsibility for the results of their customers. Software companies, however, have often failed to live up to this simple principle. So are they about to change their ways? "The problem of course is that software vendors have been doing what they’ve been doing for so long that they’ve forgotten what it’s really all about," writes Waineright.
