Strategy Rule 8 - Simple Open Path to Value with Simple Pricing and Packaging
Open Source pricing and packaging is about driving large volumes with minimum friction. It should be a no-brainer, not a fight in a Red Ocean trying to displace an incumbent vendor through a complex analysis of ROI, TCO and a long evaluation with an external consultancy.
Many years ago, I remember talking to a senior banker at Lehman Brothers and a small thing he said made a lasting impression on me – “The best Return On Investments (ROI’s) I have ever seen I have been able to write on the back of a postage stamp!” The point he was making was that when people make great (career making) decisions, the ROI is often so obvious it is a no-brainer. The ROI behind open source should be a no-brainer. The pricing and packaging should be simple, open and based on value innovation (See Strategy Rule 2).
Using publicly available, publicly verifiable information is key here. The information can be simply and independently verified with a simple web search. A good source is the US Government GSA Advantage site:
https://www.gsaadvantage.gov
What is as important is a simple pricing model that can be applied to this public information.
This compares with traditional ECM pricing models that are often as complex as the product offering, with literally thousands of options for customers to consider when pricing a product configuration. Customers are not clear on what extras are required to deliver a working system. These complex pricing methods can be based on user, type of usage, intranet, extranet, website or compliance requirements. These models need Enterprise sales people to explain them (and try to justify them with value based pricing, strategic selling … ) This, in the words of Trout and Ries is where you attack the weakness (pricing and complexity) in the enterprise software vendors strength ( a large direct, enterprise salesforce). Consumerize the sales process and consumerize the pricing model and price on fair usage as opposed to hidden extras pricing models.
- A Simple Open Path to Value
A good rule of thumb regarding cost is a tenth of that of an Enterprise vendor. They typically charge maintenance as 20% of a license. Licenses may get discounted but maintenance rarely does. Therefore at 10% you offer no license cost and are half of the annual maintenance cost. If you have, not just cost advantages, but also value innovation you are better and half of the cost per year of the existing enterprise-wide contract.
Using the US Government GSA Advantage site for comparison Alfresco enables an Enterprise to reduce their ECM cost by between 89% and 96% when compared to Documentum, OpenText and SharePoint:
That is a simple no-brainer. More detail can be found at:
http://www.alfresco.com/products/whitepapers/
Other open source vendors have equivalents that can be compared through this same process.
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Tags: alfresco, inbound marketing, Open Source, Open Source Marketing, packaging, pricing
