By: Nelson M. Nones CPIM, Founder, Chairman and President, Geoprise Technologies Corporation
Happy New Year!
With the new year come forecasts that a worldwide recession is likely, with signs of recovery around the corner by the end of 2023. In response, businesses are freezing or cutting spending on everything from marketing and research to information technology (IT).
As the Financial Times reported on New Year’s Day:
The headlong growth of cloud computing has reached a watershed, as increasingly cost-conscious customers and economic pressure combine to dampen one of Big Tech’s hottest growth markets.
The chief technology officer of one large bank complained that the biggest cloud companies had not moved fast enough to reduce fixed charges as the volume of business has soared, despite the greater efficiencies that come from operating at massive scale.
Anyone who is familiar with how most software-as-a-service (SaaS) subscriptions for enterprise resources planning (ERP) software are sold is all too familiar with this problem. According to the latest SaaS survey from KeyBanc Capital Markets, nearly half (41%) of all SaaS providers use seats as their primary pricing metric. Per seat pricing is also known as per user pricing and services are usually sold as annual contracts that typically reflect a 10% discount off quoted monthly rates.
Assuming they don’t cheat by sharing a single User Id between multiple users, the limitation of this pricing model from customers’ perspectives becomes obvious: their total cost increases in direct proportion to the number of users, with no opportunity to gain efficiencies from economies of scale. Sure, they might be able to negotiate bigger discounts when their contracts come up for renewal, but often those larger discounts are only offered for larger and longer-term commitments that would increase instead of freezing or cutting total IT spend.
Other customers are unfortunately stuck with less scrupulous software providers who are belatedly trying to force their customers onto pricier plans. Two days earlier, the Financial Times also reported that Sage, the United Kingdom’s largest listed Big Tech company, has in recent months “pushed customers who had been sold single-payment, long-term licenses to the software on to monthly subscriptions that work out to be more expensive over the long run, by saying they would turn off their licences on security grounds, despite having no specific grounds to do so in their terms and conditions.” We know. Most of our sales leads from the United Kingdom during 2022 came from Sage customers.
At Geoprise, even though we sell our GM-X ERP software on either a subscription or perpetual-use basis―in the cloud, or on premises―we deliver the best value to our customers by completely avoiding per user pricing. Instead, we license GM-X ERP software by server and subsystem. Unlimited users!
If today’s uncertain economic climate means you need to improve information sharing within your enterprise, and reap the benefits of sharing a single version of the truth, without increasing―or even reducing―your IT spending, then now is the time to switch to GM-X ERP, before you’ve added more users that would drive up your switching costs in the future.