TechPulse 360

Fight discounting: don't give away too many software add-ons

It is no surprise that enterprise software sells for 80 percent or so off list price. With end-of-quarter deadlines looming, vendors do most anything to close business.

What may surprise some is the extent to which discounting occurs this quarter as demand slows and software makers scramble to keep sales from plummeting like the Dow Jones Industrial Average.

With two months remaining in the year, industry executives believe that cautious customers will bargain harder for lower prices, according to sources close to the business. “They are anticipating downward pressure on deals already in the pipeline,” agrees John Hanson, senior executive at Accenture.

Hanson says sales made at 60 percent or 70 percent off list price are not uncommon in the industry. The business has had a difficult time weaning itself off these discounts.

But vendors don’t necessarily have to put up with the price cuts, says Hanson, who co-authored a study outlining how companies can shore up pricing at a time of slower growth. Often a developer will seal a deal on a product upgrade by throwing in a couple of its latest applications for free.

Instead of giving away these new and frequently valuable applications, developers should begin holding the line on pricing where it makes sense, he said.