The vast majority of cloud technology pricing models are typically based on metrics like the number of users, the number of units consumed, or the different modules required etc. Why? Because these are easily quantifiable metrics that fall in line with the cloud technology vendors model to predict revenue over time (i.e. year after year). This makes sense, but primarily for the provider. If you (customer) are investing in a solution to achieve a certain set of predefined and, ideally, mutually agreed to key performance indicators (KPI's), the model of pricing proposed may not align with the reason you subscribed to the solution in the first place.
As the focus on value for money increases, alongside the functionality to generate reports that help articulate that value achieved over time, both customers and cloud technology providers need to reconsider how contracts and pricing should be structured to focus on measurable desired outcomes as opposed to just usage. One would hope/believe that the two should be fundamentally related. For example, an increase in CRM user licenses should ideally lead to an increase in leads generated, or sales opportunities won. But there are two very big assumption there. First it assumes that the solution itself will help drive those leads/sales which the customer sought to realize. Second, it assumes that the customer is able to make the necessary organizational changes to achieve the value they were looking for (this is often overlooked, particularly for larger software implementation projects).
We are starting to see more pricing models that are based on not just utilization metrics, but increasingly on value realization. And this will come with the understanding that there is responsibility on both sides, provider, and customer, to do what is necessary to deliver the desired outcome. The alternative is customers that don’t feel like their investment in the solution is supporting their desired return on investment (ROI), and displaced vendors that didn't help lead the customer down a path of steady growth that justifies the investment they’ve made.
Comments