There is this space between "personal" and "enterprise" where this model works. Call it "startup" or "small business". I want something, I have a credit card, I buy, I move on. The less hassle the better.
But in real enterprises, I don't have a credit card. I don't even have authority to purchase. (There is a whole department named "procurement" for that.) But I need to see "sales decks", do webinars, talk to salesmen trying to understand my needs and saying yes to every question I ask, download trial versions, spec out requirements, do a business case, write up a recommendation to management, and figure out how complex software with lots of optional modules fits within our existing environment. It could take months to make a purchase decision on some software. In the past year, my current client has paid to fly me 500 miles away (a few times actually) to talk to salespeople face to face to get product demos and talk strategy before the ink is signed on the purchase order. These decisions are not easy nor quick nor cheap.
I understand the frustration in this post. I respect this model doesn't work at smaller scales. The current model is not perfect at larger scales. But $50,000 a year software doesn't get sold by credit card online nor through "app stores". Any company that tried to switch away from the old model and follow the new model at that level would fail, I believe.
As an example of just how ridiculous it gets, we recently drafted an RFP for a solution for licensing our custom-made software to our customers and had a vendor come in with their solution. When it came time to discuss pricing, their response was "we charge based on the amount of revenue you'll be getting from the software...so just tell us how much money you're going to make from your software and we'll get a quote over to you." Of course we told them to take a hike, but not before speaking with their other large customers who actually agreed to this model. It's frustrating to be sure, but also completely expected at the enterprise level.
Of course it's expected! When you have a solution that is going to make a huge amount of money for some other organization, you'd like to capture some of that upside as well.
Did you know that HBO prices it's channel lineup to the CableCo's at 50% of whatever they sell it for -or- $minimum_price_per_subscriber.
Enterprise software is a whole different game and blog posts like these dont fully capture the wide range of customers in the enterprise space OR the WIDELY varying levels of technical acumen that they possess. YOU might be able to take an executable and integrate it into your systems just fine, but the IT-shop at the local car dealership down the road probably doesn't. They'll happily pay for the handholding.
I guess I just find it amusing when a startup gets frustrated by the software business. If you think their sales process is cumbersome or opaque, that's probably a clue that you're not their target customer.
I think the reason why it is a diferent game is overlooked in blog posts like this. The apps that you purchase from an app store, whether brick and mortar or online, are discrete utilities with completely standardized finctions such that the market can be reduced to only a few sizes.
Enterprise software is a different game because that asumption no longer applies. Instead ypu have software that a lot is riding on, and it must be matched to the business.
I don't see what's wrong with this. If I have something that can make you $100M, why shouldn't I sell it to you for more money than if it would make you $100k?
As a vendor who's selling a single component, you don't know that and any sane company is not going to reveal to you how much money they're making from a proprietary product.
I work in Procurement and run RFP's all the time. you are right that enterprises go through this whole process and that they ask a lot of questions about software capabilities. But honestly, at the end of the day, the process is so long and drawn out mostly because of compliance. Start-ups are fun companies that don't really have to worry about the threat of being regulated or audited by the government. But a publicly traded company that has a lot of risks (banks, car manufacturers, enterprise hardware) is going to be constantly under watch. As soon as the government finds what it deems a mis-use of funds, say sainara to productivity and hello to deep auditing and a halt on productivity thanks to long meetings with auditors.
I really think if it was about price and quality, you could get through a sourcing effort in a week or two. Show me what ya got, tell me how much you are charging.
Having spent the last year on a procurement project I agree, when it's millions of pounds at stake (much more in potential benefits) the sales process is necessarily protracted. However, I agree about the pricing games. In my experience, companies give a massive list price (but don't answer questions about how many companies actually pay that price - I figure none) and then argue the "discount" percentage.
Stoney silence in pricing discussions my side is the way to get to a price that's worth talking about, months can elapse though, it's tiresome.
Do you know the price point at which purchase orders predominate over credit cards for payment? I'm launching a product soon and I plan to price it at $6k per year.
I assume that the software will be paid for by PO but if anyone here has a different view, I'd like to hear from you.
You'll likely need to go the purchase order route. My software is priced around $2.5K and it seems to be the transition zone between credit card & purchase order (at least from my experience).
One interesting thing you'll notice is Amex is much preferred at higher credit card levels (e.g. $3K vs. $1K). If you plan on pricing your product above $1K and want to use credit cards, make sure you support AMEX.
$10k is the most common threshold Ive seen. However, there are other issues that come into play, like if your product requires the exchange of NPI (Non-public information).
My former employer (>150k employees) had MasterCard limits that were $3k per purchase and $15k per month per card. Those were hard limits. Anything over that had to go through POs. Amex was only to be used for travel, couldn't use them for purchasing products.
Current employer (<50 employees) has us use our personal cards and get reimbursed. Anything over a few hundred is going on a PO.
Sorry, just saw your response. I need to use a PO for most any one off purchase over couple of hundred pounds and always for anything that involves a recurring charge.
But in real enterprises, I don't have a credit card. I don't even have authority to purchase. (There is a whole department named "procurement" for that.) But I need to see "sales decks", do webinars, talk to salesmen trying to understand my needs and saying yes to every question I ask, download trial versions, spec out requirements, do a business case, write up a recommendation to management, and figure out how complex software with lots of optional modules fits within our existing environment. It could take months to make a purchase decision on some software. In the past year, my current client has paid to fly me 500 miles away (a few times actually) to talk to salespeople face to face to get product demos and talk strategy before the ink is signed on the purchase order. These decisions are not easy nor quick nor cheap.
I understand the frustration in this post. I respect this model doesn't work at smaller scales. The current model is not perfect at larger scales. But $50,000 a year software doesn't get sold by credit card online nor through "app stores". Any company that tried to switch away from the old model and follow the new model at that level would fail, I believe.