Is Software Pricing A Science Or An Art?

Mark Bartrick

I’ve been with Forrester for just over a month now. It’s great to be involved with our clients and communities and to be helping businesses across the world evaluate the quality of software suppliers' proposals from a commercial perspective (e.g., is this a great deal or can the supplier do better?). One of the best parts of being at Forrester now is seeing the continuation of the work I did prior to joining Forrester — advising businesses on software contract and pricing negotiations. One thing I noticed then, and continue to hear about now, is the reluctance of software suppliers like IBM, BMC, CA, and Compuware to publish meaningful list prices or to explain how their price book worked or how discounts had been determined. Time and again I had to ask suppliers to un-bundle prices and confirm the basis for the net prices they were proposing. Does anyone else agree with me that pricing should be clear and transparent and not a black art?  

Here’s an example of an “art” that should be science: list pricing. While it’s logical to think list pricing is the same foundation upon which all bids are built, that’s actually not the case. Often, I found that my clients were being quoted “list pricing” that was different. Isn’t list pricing supposed to be the same by definition? Which is why you may with good reason doubt the validity of a list price or the competitiveness of a discount that you’re being offered by a software supplier. It’s why I love my work, and why you should make sure you get third-party validation of your deals.

How you do validate your software vendors’ list pricing and proposed discounts?