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The total cost of ownership and software pricing trends

In a recent report by PriceWaterhouseCooper (Software Pricing Trends) the executive summary starts of by saying:

open quote The power balance between software vendors and enterprise customers is profoundly changing due to a confluence of economic, market, and technological factors. Vendors can no longer solely dictate the terms of how they sell and price their products. They must take into account a new breed of customer that judges software by its ability to contribute value to the organization—measuring where, when, how much, and how well software is used. close quote

In my experience this has been true for sometime now, it's a long time ago since you could sell software by dazzling decision makers with pie charts! We've focused on delivering solutions that contribute value to our clients. Perhaps that just because we have primarily worked with the Small to Medium Enterprises (SME) since 2002.

The report goes on to say:

open quote New pricing structures like software-as-a-service will have significant implications for software vendors, resulting in the adoption of new business models as well as changes to vendors’ economic and financial, research and development, and sales practices. close quote

It reflects an increasingly and sometime bewildering array of options clients have to consider, when choosing the right solution for their business.

We launched The Childcare on-line Booking (CoB) system at the tail end of last year following the huge success of a number of bespoke out of school booking systems. This enabled us to bring down the cost of the software substantially for schools, academies and after school clubs and has enabled us to provide a market leading solution to a wider audience.

However schools and after school clubs are still faced with a ream of choices and it's difficult to compare like for like, in part because of the diiferent approaches to pricing and the varius revenue models.

We did some research before writing this article and found around ten to fifteen solutions each with a different pricing structure.

Supplier #1: free 1-month trial, not pricing available, but offer a monthly fee via standing order.
Supplier #2: no up-front fee, £ 89.00 per month
Supplier #3: £ 600 set-up fee, £ 50 per month
Supplier #4: based price on the number of children on the school roll, kicking off at £ 500 (59 - 100) and quickly increasing to £1,000 + for (200+)
Supplier #5: £ 2,500 up-front fee, £150 per year maintenance fee.

We often talk about "total cost of ownership" which takes into account all the costs incurred running a system and allows business managers, head teachers or governors to establish the actual cost. We are of the view that a Childcare booking system is a long term investment that will serve your school or business for years to come. CoB is always improving based upon our clients feedback and a purchase ensures you get these updates free, for life. If we therefore take a standard time of five years, the five suppliers (above) will equate to a total cost of:

Supplier #1: unknown *
Supplier #2: £ 5,340
Supplier #3: £ 3,600
Supplier #4: unknown *
Supplier #5: £ 3,250

* Unable to accurately determine the total cost of ownership based on information publically available.

As you can see over a longer term Supplier #5 represents the best value for money. The cost gap will also continue to rise after the 5 year point. Therefore when gauging the Return on Investment (ROI) of a new childcare booking system it is worth calculating the costs over the complete lifetime of how long you expect to be using the system. Whilst low upfront cost systems may allow you to get underway for a lower investment if you intend to run your system for a decent amount of time a relatively higher entry point with lower ongoing fees will produce a better ROI. In this example Supplier #5 is Ayrmer Software. We have intentionally priced this way as we look to make a good long term relationship with your business and to ensure that if you purchase our childcare booking product, it will grow with you for years to come. We stand by our value for money system. If you have any questions about pricing, how the system will change over time or would just like to access your own personal demo, give one of the team a call today. 

Date: 30/06/2016

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