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May 19, 2010




Pricing is an difficult problem fraught with nonlinearities and subjectivity. To the bind you mention, I like to focus on customer value. I think of what the product's ROI will be for the customer -- what their process is like without and with our product and how long it will take for them to break even.

At SpaceClaim, our ROI is so short for most use cases that the numbers aren't credible. For example, simulation users typically are able to run twice as many concurrent simulations at the same time because we remove their CAD geometry bottleneck. That's like xeroxing a analyst who's fully loaded cost is maybe fifty times the cost of SpaceClaim.

Once you understand the value you deliver, then you can look at comparables, market pressures, etc. It seems reasonable to present a three-to-nine month ROI, but we wanted SpaceClaim to be an even more obvious choice. We wanted to show that SpaceClaim can pay for itself in a single eval period.

So, here's a challenge: try to figure out what the value of cloud computing is. What does it cost to deploy CAD today, and what savings can be realized on the cloud? I don't know the answer, but it's out there. Want to throw a Google spreadsheet and ask the world to contribute data of what their actual costs are?



How about accounting for cloud costs?

It's easy to generate pie-in-sky estimated of how much cloud stuff can save ("we'll get rid of all our IT dudes"); I'm skeptical. It's more important how the tool works and fits in the workflow.


In my humble opinion, point b & c will never happen. Ever.

The only reason about these delay tactics in terms of pricing is because our industry cannot put a price on innovation. When every (so called) version of a product is innovative and customer focused, its hard to come up with a model when the whole delivery platform is changed, and so drastically.

Another point I would like to mention is that pricing is hardly done with cost + markup model in software products business. Yes, this is still the model of choice in the services business, but in products, its better to price at customer's perception of perceived benefits than of actual value or cost. Google Adwords is a perfect example. The price you pay in an ad auction is not dependent on the cost to Google, but to what others are ready to pay.

Cant say I can argue with your last sentence. Not yet. Exactly like our desktop software is not going to be replaced by a webos soon, same can be said of our industry. Hugely popular products like Office and productivity tools are only now offering a similar setup on the web.

Needless to say, this is a long game, with too many game changers waiting to happen.

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