Forrester: Sluggish economy prompts software pricing changes

The worldwide recession has hammered IT budgets but has also prompted vendors to make their software pricing and licensing models more customer-friendly, according to a new Forrester Research report.

Forrester's report looked at how 12 enterprise software vendors' pricing and licensing strategies changed in the fourth quarter of 2008 and the first quarter of this year.

Easily the most dramatic change was SAP's recent, well-publicized agreement with user groups around KPIs (key performance indicators) to prove the value of its fuller-featured but more expensive Enterprise Support service.

"The SAP change hasn't really caused the market to go and say, we'll do KPIs now," said the report's author, analyst Ray Wang.

But overall, "it is truly a buyer's market," he said. "We're really seeing vendors being a lot more accommodating, especially with new customers."

Beyond increased flexibility at the negotiating table, enterprise software vendors have made a variety of policy changes in recent months, Forrester found.

Deltek, maker of software for project-oriented businesses like construction and aerospace, has created simplified pricing bundles and standardized maintenance and support fees for all modules at 18 percent, according to Forrester's report.

Fellow ERP (enterprise resource planning) vendor Lawson Software recently boosted its support offerings, including the addition of global, 24-7 coverage.

And Microsoft recently rolled out a new premium support offering, Premier Mission Critical Support, as well as multiyear payment plans for Dynamics CRM (customer relationship management) and ERP applications.

One question, however, is whether customers will or can maintain their negotiating advantages when the economy rebounds.

"When the economy does pick up I'm sure the discounting will be less," Wang said. One thing customers can do now, however, is to try to put some price protection clauses into contracts, he added.

Copyright © 2009 IDG Communications, Inc.

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