Value Pricing Technology Solutions

In the August issue of Accounting Technology magazine, VeraSage senior fellow, Ed Kless is quoted extensively in an article entitled The Price of Everything Software. The article presents both value pricing and hourly billing points of view, proving that Oscar Wilde’s quote about cynics clearly applies to opponents of value pricing.

Comments

  1. Ed,
    Fascinating article, especially the perspectives of the Microsoft resellers, such as Larry Schiff who thinks getting rid of hourly billing is a “very bad idea.” Interesting.

    How does he think Microsoft prices its products? By the hour? He also thinks fixed prices “create a lot of problems.” I suppose, then, that most businesses are doomed, since nearly all of them provide a price to the customer before they purchase.

    Mike Gillis, CEO of Iteration2 wonders: “If you spend so much time adminstering your billing method, how much value could it have?” Great question to ask about the time and billing programs most resellers cling to, since we know it costs between 4-10% of gross revenue to maintain these monsters.

    Pricing is the number one driver of profitability in any business, more so than increases in productivity, reduction in costs, or rainmaking. Most Fortune 500 companies maintain pricing departments for this very reason. That’s how much value paying attention to pricing can capture.

    Ironically, Schiff worries about consultants salaries are leading to absurd situations, asking “How can you pay six figures to be a consultant and pay $125 and $135 an hour?”

    Well, if you focused on capturing the value your company created, you would be able to pay theses consultants a competitive wage. It’s the value that drives the price, not the costs.

    It seems as if resellers who cling to hourly billing are destined to maintain a union employee mentality, worrying about how much they make per hour rather than focusing on creating more value for the customers they are privileged to serve.

    I wonder if Bill Gates keeps a timesheet?

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