What Do You Do If A BI Vendor Offers You A "Discount" Without Published List Prices?

By Boris Evelson

I get this request almost on a weekly basis: "Boris, my BI vendor is offering me the following discount, is it a good deal or not?" The first question is what are you comparing it to? It reminds me of an old joke: Q. How much is 5 times 5. A. Depends on whether you're buying or selling. Many of the vendors do not publish or reveal list prices, or even if they do, they are revealed only under NDA to each client, so good luck comparing what the vendor told you and what they told another client. So what ARE you comparing it to?

Another problem, IMHO, is that many of the vendors muddy the waters with CPU based prices, clock speed based prices, etc. Yes, CPU, server, core based prices make sense if you are growing and want to lock in a good deal now, before you grow and expand. But in the end, you, the buyer, still need to figure out how much the software costs you per seat, per user.  So with both of these challenges in mind I looked through my 20+ years of notes on BI contracts and per seat license costs and came up with the following. Notice, an interesting X-factor (obviously, I fixed the numbers a bit to have it look nicely like that):

  • BI output consumer, no interactivity $300
  • BI output consumer, with light (sort, filter, rank) interactivity $600 (or 2x)
  • BI output consumer with heavy interactivity (interactive dashboards, search, etc.) $1,200 (or 4x)
  • Power users (generate content) $2,400 (or 8x)
  • Developers (includes ETL, scripting, scheduling, etc.) $3,600 (12x)
  • Administrators $10,800 (36x)
  • Advanced analytics (data mining, predictive modeling) $10,000 and up.

 

Then, what I usually tell my buy-side clients is that in large deals a BI vendor would typically offer a 20%-30% discount right off the bat. Don't fall for that. My recommendation: ask for a 70% discount and do not negotiate to below 50%. I plan to publish a research doc on this subject with more specific vendor details and BI pricing/contracts best practices in Q4.

I know BI vendors will hate me for this, so I am putting on my motorcycle helmet and am ready to take the shots.
 

Comments

BI pricing models

Boris, I couldn't agree more on all the “gotchas” in the traditional enterprise licensing model. Suggested list price for traditional BI software is like shopping at Moroccan Souk Bazaar.

Something is wrong with a pricing model when we start at 50% off “list” and work down. By design, that model manipulates customers into an up-sell situation; shocking I know.

My suggestions:
1. Do not allow your hardware purchase to be tied to hardware performance – a ploy that’s been around for years. The difference is today, “cores” have replaced “MIPS.” Who wants a note from their enterprise BI provider congratulating them on the purchase of a new multi-core server with an additional charge for software they already purchased?

2. Similarly, beware of role-based pricing models from BI vendors. It’s like saying, “Dear Sir/Madam, your position, job function and organizational role indicates to us that interactive graphics is well above your pay grade, but congratulations, you are performing functions well above the role we profiled for you. You are exceptional, an outlier, a rising star in the organization. That will be another $600 dollars, thank you.”

“Core pricing,” role-based licensing and limited-use schemes all force an upgrade situation, which begs the question, why not structure pricing models based on the consumption of resources? If you want to pay for what you use in BI, look to SaaS pricing models that are designed around the cost for services provided. Most SaaS licensing models allow organizations to grow your user community through the natural adoption driven by the success of the implementation. Doesn’t that make more sense?

“Bazaar pricing,” buying in advance of a need, and the “small print” up-sell schemes in enterprise software are relics. Today, there are alternatives to the overly complicated enterprise BI pricing models, offering you more control and less risk. Organizations can also eliminate the hidden costs of software upgrades and system maintenance using a SaaS model.

So next time you negotiate with your BI vendor, ask them to provide you a pay-as-go-model. If they can’t provide it, find a vendor that will.

Dyke Hensen
PivotLink