SoftGram Bi-Weekly for 11.27.2005, Vol. 1, No. 8 SoftGram Spotlight: Keeping Microsoft’s Pricing Changes in Perspective (Editor's note: This special "makeup" edition of SofGramSoftGram is being sent to you since we did not publish last week due to Thanksgiving.) ______________________________________ SoftGram is a Softletter Publication and is published on the first and third weeks of each month. To Subscribe to SoftGram, please visit us at http://www.softletter.com/aspx/Profile.aspx ========================================================= To unsubscribe from SoftGram, please use the opt-out link below: http://www.softletter.com/aspx/optout.aspx?u=[[user_id]]&un=[[UserName]] To change your profile and various user options, please use the link below: http://www.softletter.com/aspx/Profile.aspx Before you can use this option, please login into your account. 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Macrovision's FLEXnet® Publisher 11 helps software vendors quickly and easily deliver software the way your customers want it. Increase customer satisfaction and gain competitive advantage by simplifying software installation and activation using self-service customer portals. FLEXnet Publisher also reduces support costs and reins in revenue leaks from license changes. CLICK BELOW to try our License Assessment Model and find out which licensing models are right for your business: http://www.macrovision.com/LAM_reg/index.shtml?source=FNP_X_X_11_L_FNP11 _________________________________________________________ THE LATEST ADVISORY BOARD ARTICLE IN SOFTLETTER COVERS: Keep Microsoft’s Pricing Changes in Perspective by Jim Geisman, MarketShare, Inc. At the recent SoftSummit conference, Microsoft announced its new pricing for a server-based OS supporting multiple virtual machines. This announcement is a stark reminder why it may not be a good idea to follow another company’s pricing policies. Prior to their announcement, Microsoft pricing was based on counting the number of copies of an application installed or available for installation. Under the new pricing scheme for Server 2003 R2, Microsoft will charge only for the copies that are installed and used. Even though this pricing is effectively an 80% price cut, according to the GM of the server operation who made the announcement, Microsoft is comfortable their revenues won’t be hurt by this move. We doubt there are many software companies who, if they followed Microsoft’s move, would be equally comfortable. Unlike many vendors, Microsoft has other ways to capture whatever revenue they will be giving up with the price cut via the sale of more applications and services. Microsoft possesses such a wide net of products that an account representative can easily accomplish this by reminding an IT manager that a decrease in the cost of server sales means there is more money to spend on applications and that a budget unspent is a budget reclaimed (from the coffers of IT). This approach sparks warfare among Microsoft’s product line managers, but from the standpoint of overall revenues, Redmond doesn’t suffer. * Here is the piece of what Microsoft has done that ISVs should follow—set prices and pricing policies that are consistent with your overall business model. Because of its size and monopoly power in applications and the desktop OS, Microsoft can focus on the total IT budget. But it’s unlikely your company can play the same game that Microsoft can. * Another guideline, one that we and other pricing practitioners have emphasized for years—set prices and pricing policies that achieve the closest practical alignment with the actual value delivered to your customer. For example, do you sell solutions into the insurance industry? Then discuss your pricing terms in the same language as your customers. In this industry, firms think in terms of cost per policy; your pricing models should adopt the same language and align with your customer’s models and how they charge. * Finally, avoid, if at all possible, tying the price charged for your software with the hardware on which it operates. It always amazes me how software companies continually remind their customers of Moore’s law and reinforce the notion that since CPUs are becoming cheaper, therefore your software must become cheaper as well. (Oracle has been fighting this war for years.) Hardware enjoys economies of scale software developers don’t. A hypothetical hundred dollars spent in year one on chip development scales down to zero over time, but with software you have to live with the development costs for years; figure on at least $20 per year for the life of the product. When a license count depends on hardware performance, anticipate that customers will expect lower prices, less software will be licensed, and your products will appear more expensive. Excerpted from the November 15th issue of Softletter: http://www.softletter.com _________________________________________________________ UPCOMING SOFTLETTER SURVEYS INCLUDE: As you may know, Softletter and Software Success publish a series of annual salary surveys that cover senior job titles in the software industry. Our current questionnaires cover Controller and CEO compensation. We're looking for some fairly standard information--in particular, a comparison of "base salary" vs. "variable pay" (bonuses, commissions, etc.) for your most recent full year and for the previous year. We'll use this data to identify trends and current compensation benchmark that you can use to see how your own salaries compare to pay levels at comparable companies. In addition, we compare salaries based on company development stages, an important factor that's rarely taken into account in other salary surveys. To participate in these surveys, please click on the links below: Controller: http://www.softletter.com/survey/conpay.htm CEO: http://www.softletter.com/survey/ceopay.htm As usual, everyone who supplies data for these surveys will receive a complimentary copy of the final report. Of course, all responses will be strictly confidential. We won't disclose or identify data about any individuals or about participating companies. Please note that the last day for submitting data is Monday, December 12. Final survey results will appear in our December 15 and 30 issues. ________________________________________________________ THE SOFTLETTER FORUMS ARE FREE NEW on the Softletter Forums: Subscribe to a thread! Post a question, subscribe to the thread, then anytime a new entry is made to the thread, you'll receive an E-mail notifying you of that fact. Talk to the Softletter editors and share knowledge with your industry peers. _________________________________________________________ INFO POPS are sponsored by: License Technologies Group Since 1996, License Technologies Group (LTG) has been the established leader in providing solutions specifically designed for software publishers to more efficiently manage their software licensing business. Our systems and services support software license management, renewals management, eCommerce, Digital Rights Management, Partner Relationship Management and global fulfillment. We understand all of the nuances and best practices necessary to harness the power and profitability volume license and compliance programs can provide. Our experience in providing these solutions helps softwa practices and gain a strategic advantage on their competition. Smart Tools. Big Savings. http://www.licensetech.com ******************************* INFO POPS Five years after the dot-com bust we now find ourselves on the cusp of a second revolution: Web 2.0 (or so it's been dubbed) — the first version upgrade of the World Wide Web. Richer Web software is popping up daily and amazing us with an entirely new experience. Interactive Web applications are being launched with such robust functionality that they're threatening the future of the common desktop application. Technologies like AJAX have gained widespread buzz in a short period of time, proving that the market is now ready for what was promised years ago. Excerpted from: http://www.globetechnology.com/servlet/story/RTGAM.20051115.gtflgomexnov15/BNStory/Technology/ ******************************* Betas also have become a marketing device in a fiercely competitive industry, allowing software and Internet firms to release new products or services sooner and cultivate early buzz. Betas, which once had been quietly distributed, are trumpeted in press releases and at news conferences. "I deplore it as a consumer; I admire it as a marketing professional," said Peter Sealey, a marketing professor at the University of California at Berkeley and former chief marketing officer at Coca-Cola Co. "I can't come up with anything else in the entire marketing world where marketers knowingly introduce a flawed or inadequate product [and] it helps grow your user base." Excerpted from: http://online.wsj.com/public/article/SB113268410649404315-CmlEYCMNLKztOfB8PWMfA0IiiXA_20061128.html?mod=blogs ******************************* Several weeks ahead of the second phase of World Summit on the Information Society (WSIS) in Tunis, the Austrian government invited numerous companies and organizations to participate in a conference to help draft a briefing paper, called Vienna Conclusions, which Austrian government officials planned to present at the summit. The original draft contained a reference to free software, but the final draft did not, after a request from the Austrian subsidiary of Microsoft to have it removed. That briefing paper was one of many used to craft a final document, which did contain a reference to free software despite Microsoft's attempts to have it read otherwise. Excerpted from: http://www.infoworld.com/article/05/11/28/HNmsfreereference_1.html?source=NLC-TB2005-11-28 ******************************* Microsoft was already months into A massive project aimed at taking down Google when the truth began to dawn on Bill Gates. It was December 2003. He was poking around on the Google company website and came across a help-wanted page with descriptions of all the open jobs at Google. Why, he wondered, were the qualifications for so many of them identical to Microsoft job specs? Google was a web search business, yet here on the screen were postings for engineers with backgrounds that had nothing to do with search and everything to do with Microsoft's core business—people trained in things like operating-system design, compiler optimization, and distributed-systems architecture. Gates wondered whether Microsoft might be facing much more than a war in search. An e-mail he sent to a handful of execs that day said, in effect, "We have to watch these guys. It looks like they are building something to compete with us." Excerpted from: http://www.fortune.com/fortune/print/0,15935,1050065,00.html ________________________________________________________ CHANGE YOUR SOFTGRAM SUBSCRIPTION : To unsubscribe from SoftGram, please use the opt-out link below: http://www.softletter.com/aspx/optout.aspx?u=[[user_id]]&un=[[UserName]] To change your profile and various user options, please use the link below: http://www.softletter.com/aspx/Profile.aspx Before you can use this option, please login into your account. If you have not changed your profile, your username is the first letter of your first name and the first seven letters of your last name. Your password is "softletter." To update your address or change your profile, please use the link below (this link takes you directly to your profile assuming you have chosen to stay logged in via a cookie exchange): http://www.softletter.com/aspx/myMain.aspx