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correct. So a source of information becomes valuable to the extent that it has proven reliable in providing accurate, useful information.
Here is where Analysts in today’s market are in trouble. Almost all the big telecom and software analysts have proven unreliable in helping service providers accurately judge the relative value of products. This information is critical to determining the absolute value of their products and allowing accurate prices to be, respectively, set or paid. Smaller boutique analysts, such as Lorien Pratt (Quantellia), Kimber Lewis (Paradigm Venture Partners), and Trevor Hayes (LTC International) are very accurate at predicting trends about software and products and even in picking market winners, but smaller analyst groups must do costly surveys of cultivated contacts to determine existing prices (relative value) and compute service provider utility (absolute
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How will perpetual license prices be converted into cloud-based subscription services? |
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Good: Fortunately there are many instances of integrity. The greater value of reliable/accurate information in decisions, actually adds market value to such integrity.
Ugly: Today’s OSS/BSS is not a monolithic product from one vendor; it is a mix of many integrated products that together are responsible for total value. It is difficult to parse out the relative value of a component part except when that component is a bottleneck with negative value. Complexity of the product and product sale can obscure accurate price determination and make price intelligence data rather meaningless. If every sale is different, how do you compare the sales in order to judge the price/value component?
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value) with accuracy. When they gain spot information, they are often bound by confidentiality agreements or by company policies that protect their sources. Big telecom analysts instead regularly get inside information from all parties, but often are wrong at setting value or choosing the best-of-breed. Why is this? We cannot know. However, let us look at existing market conditions and intelligently speculate ...
Bad: It is an open secret: big vendors influence the assessments of analysts. They sometimes do it questionably, but most often by legal, accepted methods that are similar to political lobbyists. They impart information only to their vetted, tame analysts. This information becomes the lifeblood of the “domesticated” analyst who will talk up the vendor to keep the relationship. Often the vendor pays the analyst for services and reviews – we all must make a living.
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Pricing the Transition
How will perpetual license prices be converted into cloud-based subscription services?
Some data exists on existing price conversions for perpetual to subscription. Annual, or monthly, subscription prices are of course, less than the one time charge for a perpetual license. However, the annual subscription includes and subsumes the maintenance fee. Indeed subscriptions require the vendor provide high quality continued support for a product which also probably increases the lifetime of the product and therefore extending the time supporting the product.
Most subscription prices range between annual charges of 40% to 60% of perpetual license fees. Those looking at the subscription model as an avenue for product financing
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