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Microstrategy simplifies licensing, pricing in bid for growth

The market demands agility and flexibility from BI vendors, according to one analyst

By Chris Kanaracus
July 8, 2014 08:34 AM ET

IDG News Service - Hoping to win new business and build loyalty among existing customers, business intelligence software vendor MicroStrategy has broadly revamped its pricing and packaging structure.

The company previously divided its technology into 21 different products, which have been collapsed into four packages. Microstrategy Architect, which bundles all of the company's developer tools; MicroStrategy Server, which contains server infrastructure components as well as administration and monitoring tools; the MicroStrategy Web interface; and MicroStrategy Mobile.

With Architect, MicroStrategy has an eye on the long game. Architect is priced at $5,000 per named user license, while in the past, buying all of MicroStrategy's developer components separately would cost $50,000, said company president Paul Zolfaghari.

That may seem like a dramatic price cut, but isn't from one perspective, Zolfaghari argued. That's because historically, customers have tended to buy only one or two developer components sold by MicroStrategy, he said.

"Customers in the past had to make choices between the software we had for a developer," he said. "The goal really is simplifying the relationship with MicroStrategy."

Now, it can present customers with the full suite at an attractive price. Over time, that move could expand MicroStrategy's developer pool and increase the number of projects customers undertake, thereby making the company more money on its other products.

Cost savings for the other three new products "isn't as pronounced," but will position MicroStrategy quite competitively, he said. Web and Mobile are priced at $600 per named user or $300,000 per CPU core, while Server is $1,200 per named user or $600,000 per CPU core. The company says a CPU core license can support 500 to 1,000 users.

Meanwhile, current customers will be able to download any components they haven't already licensed at no additional charge, Zolfaghari said. "There's no catch."

What may seem like a giveaway will actually work in MicroStrategy's favor as it will make future sales easier and generate more customer loyalty, he added. "We think it's a great chance for us to build a new foundation."

MicroStrategy is facing competitive pressure from business intelligence vendors such as Oracle and SAP, as well as newer companies such as Tableau. It generated $576 million in revenue during 2013, with $83 million in profits.

"At the end of the day this is not a response to competition," Zolfaghari said of the changes being announced this week. "It's a response to the way customers and partners want to purchase software. Great technical innovation needs to come with the practical reality of simple packaging and pricing."

One industry analyst agreed with MicroStrategy's move.

"It's all about agility, time to market and speed of deployment," said Forrester Research analyst Boris Evelson, via email. "Being able to quickly react to changing market and regulatory conditions and pivot on a dime."

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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