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February 13, 2013

Software Market Shifts Call for Industry-Wide Change in Pricing Strategies, PwC Reports



PricewaterhouseCoopers (News - Alert) just released the second in its series of reports on how pricing has been affected by the recent shift from license to services in the enterprise software sales model.

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The report is entitled “The Future of Software Pricing Excellence: The New State of the Art,” and takes aim at existing business models and pricing strategies, highlighting how each model is faring compared to the rest of the market.

“Companies today are focusing more on pricing excellence,” said PwC’s global software leader Mark McCaffrey. “Those who coordinate a pricing strategy framework with organizational processes and structure, systems, data and culture can obtain notable increases in ROI and decreased revenue leakage among other benefits.”

PwC’s report includes the company’s four point pricing management framework, which centers around pricing strategy in general, price formulation and both transaction and performance management.

“By combining analytics with formalized processes and standards, companies can get on a path towards a more coherent, organization wide pricing model that delivers proven results,” McCaffrey added.

With the right strategy, the companies on the PwC report that are struggling can create higher win rates and reduce the gap between actual prices versus list prices. In addition, PwC notes that companies matched with the right pricing model will reduce their revenue leakage significantly.

“The Future of Software Pricing Excellence” report offers full outlines various business models in use in the industry, as well as the pricing strategies involved, so companies can have concrete examples of which strategies are successful at the moment and which are not.

Some companies are just not keeping up with the rampant changes and innovations seen in the software industry today, and PwC hopes this report will help get these businesses in gear and up to date with the changes, leveraging the new elements at work as opposed to ignoring them.

Undisciplined pricing, inconsistent analytics and uninformed decision making are more common in the software industry than one may think, so an industry-wide revamp in terms of pricing strategy is what PwC, and any others who read this report, are calling for.



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