The effect of pay-as-you-go pricing on the Enterprise Application market


C24 Ent Apps Blog 2 - Pricing

Subscription pricing is becoming a standard feature of many modern cloud based enterprise applications, further narrowing the gap between enterprise and consumer applications.  Whilst companies may investigate a range of options about where to house their IT for maximum cost savings, most agree that software-as-a-service offerings reduce time, money and resources when it comes to managing the ongoing application upgrades and underlying hardware.  For instance, Toyota brought a large amount of IT infrastructure back in house, but chose to capitalise on the savings offered by many software-as-a-service applications that enable the delegation of the software and hardware upgrades to the SAAS vendor.

The availability of enterprise applications under a pay-as-you-go model means that the playing field has been levelled for many smaller companies who previously could not afford the upfront licence costs – now startups and SMBs have the ability to access enterprise functionality and change perceptions about how applications should work for them.

As cloud technology matures and becomes more accepted at the corporate and enterprise level, larger businesses are also experimenting with non-traditional approaches that enable them to access subscription based pricing – without needing to go through layers of finance sign offs that may be required for high-cost capital purchases.  Many are now utilising cloud based services such as Amazon Web Services or Microsoft Azure Cloud to deliver reliable infrastructure services on demand with lower costs of entry than would be available years ago.  This also delivers a benefit for software developers who may not have previously had the capital available to build expensive infrastructure platforms on which to house their software; they can now enter the market at a lower developmental cost and bring products to consumers faster.

But it isn’t just startups and disruptors who are delivering their solutions via subscription models.  The majority of the mature enterprise application vendors all have their own software-as-a-service offerings to meet the demands of a changing consumer market.  Oracle has reported that revenues from new software licences have dropped by 17% whilst at the same time revenues from their cloud services have increased by 29% in the same period, showing the shift in the market as vendors pivot to match client demand.

 

 

If you are interested in knowing more about the consumerisation of enterprise applications then read our whitepaper on “The Consumerisation of Enterprise Applications”.

 

 

Image provided courtesy of Mighty Travels.

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