Enterprise Software Pricing: Approaching the Tipping Point for a Collapse?

1

Enterprise Software Pricing:Approaching the Tipping Point for a Collapse?

April, 2008

Chris Dowse

CEO, Neochange

© 2008 Neochange, Inc. 2

Neochange: Adoption SpecialistsNeochange: Adoption Specialists

Enterprise Buyers

Software Providers

Neochange

Management consulting firm exclusively focused on Effective User Adoption solutions for Enterprise Software.

Using our innovative AdoptITTM

methodology we:

� Accelerate time-to-value for new deployments by mitigating adoption risks

� Increase effective usage of existing deployments to improve value realization

� Increase the capability to lead business transformations

© 2008 Neochange, Inc. 3

© 2008 Neochange, Inc. 4

Definition of Software SuccessDefinition of Software Success

N=159

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Successful

Implementation

Software Is Deployed

High Effective Usage

Value Realization

Buyers Providers

© 2008 Neochange, Inc. 5

13%

16%

1%

70%

Process Alignment

Organizational Change

Software Functionality

Effective User Adoption

#1 Driver of Business Value#1 Driver of Business Value

N=159

© 2008 Neochange, Inc. 6

Current State of Effective UsageCurrent State of Effective Usage

0

5

10

15

20

25

30

35

40

45

50

< 15% 15 – 49% 50 – 69% 70% <

Buyer Provider

N=159

% of Respondents

© 2008 Neochange, Inc. 7

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010

Automated SW License Tracking Application Mapping End User Monitoring

Software Utilization TransparencySoftware Utilization Transparency

Enterprise Market Penetration

(Software License) (Forrester)(Gartner)

Shelf-Ware Visibility

Complete Visibility

Critical Application Visibility

© 2008 Neochange, Inc. 8

Buyer Expectation of their ProviderBuyer Expectation of their Provider

5%

48%

47%

Product Expertise Only

Software / ProcessAlignment

Value Enablement

N=159

© 2008 Neochange, Inc. 9

Buyer Willingness to Pay for HelpBuyer Willingness to Pay for Help

N=159

0% 20% 40% 60% 80% 100%

Not Interested Depends on Scope/Complexity Must Have

© 2008 Neochange, Inc. 10

Business Impact of Effective UsageBusiness Impact of Effective Usage

N=159

0 5 10 15 20 25 30 35 40

Information Storage

Governance &

Decision Support

Process Automation

Competitive

Advantage

Buyer Provider

© 2008 Neochange, Inc. 11

Act #1: Rebalance the Investment Portfolio

Act #1: Rebalance the Investment Portfolio

© 2008 Neochange, Inc. 12

Act #1: Adoption PerspectivesAct #1: Adoption Perspectives

Understand the market influences on user adoption and define EUA competition tactics

Understand the alignment of the provider’s approach to managing customers adoption risks and driving effective usage

Understand common adoption risks and leverage points related to the target customer

ProviderProvider

MarketMarket

CustomerCustomer

Domain Domain

MaturityMaturity

Value Value

PathPathService Service

ModelModel

Industry Industry

Standards Standards

Adoption Adoption

DisciplineDiscipline

Value Value

DialogueDialogueOperating Operating

ModelModel

Solution Solution

RisksRisks

Customer Customer

SegmentSegment

Adoption Adoption

RisksRisksBusiness Business

DriversDrivers

Change Change

Capacity Capacity

© 2008 Neochange, Inc. 13

Act #2: S&M focused on Lifetime Customer Value

Act #2: S&M focused on Lifetime Customer Value

Increasing vertical saturation &

competitive functional parity

Return on S&M

Investments

Feature Focus

Effective Usage Focus

© 2008 Neochange, Inc. 14

Act #2: Customer Value PathAct #2: Customer Value Path

FUNCTIONALITY

OPERATIONAL CAPABILITY

BUSINESS VALUE

© 2008 Neochange, Inc. 15

Act #3: Expand Services CharterAct #3: Expand Services Charter

Adoption Readiness Accelerator

Adoption Management Support & Education

Adoption Risk Mitigation Strategy

Enterprise Value Path

Effective Usage Activator

© 2008 Neochange, Inc. 16

Act #3: Expand Services Charter

Act #3: Expand Services Charter

Change Leadership

Deployment

Technical Domain

Organizational Blueprint

Tech Configuration

Integration

Core Product

Business Domain

Usage Domain

USAGE domain is where the organization effectively uses the solution to deliver value:

Change Leadership –compelling vision communications, adoption risk management & governance, stakeholder management, value realization strategy

Deployment – Planning & coordination, user training & development, technical deployment, support structure, rollout strategy

TECHNICAL domain covers customization and core software:

Technical Configuration – Infrastructure preparation, product installation, connectivity, platform settings, performance tuning

Integration – System & data interfaces

BUSINESS domain drives key decisions that underlie organization & application design:

Data Models – Decision-making, reporting

Processes –workflows, procedures, controls

Organization Structure – Functions, managers

Decision Rights & Authority – Approvals, access

© 2008 Neochange, Inc. 17

Act #4: R&D towards UsabilityAct #4: R&D towards Usability

Degree of Usage Gap

Return on R&D

Investments

Feature Innovation

Usability Innovation

© 2008 Neochange, Inc. 18

Act #4: Expectation of Existing Customer

Act #4: Expectation of Existing Customer

19%

21%

13%

47%

New features/functionality

Upgrades/Upgradeability

User Skill Development

Enabling Better Usage

N=159

© 2008 Neochange, Inc. 19

Sustainable Revenue Growth from Adoption Strategies

Sustainable Revenue Growth from Adoption Strategies

Maintenance

Renewals

Maintenance

Prices

License Footprint

Expansion

Value Assurance

Services

Revenue Generation

Revenue Protection

© 2008 Neochange, Inc. 20

Presentation SynopsisPresentation Synopsis

Most software buyers are struggling to achieve a level of effective software usage that delivers promised business results.

� As visibility into software utilization continues to increase, many software providers will find their license / maintenance prices under immense pressure to decline.

� While posing a significant revenue risk, proactive software providers can turn this challenge into a new revenue opportunity.

� 4 critical leadership acts that software executives must make to maintain sustainable revenue growth.

© 2008 Neochange, Inc. 21

Questions?Questions?

Contact Details

chris.dowse@neochange.com

415-823-7549

www.neochange.com