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By Paul Solski, Founder, AIM International
Cloud computing brings immense
benefits to customers by shifting the burden and risk of building, operating
and owning the data center to cloud services providers and effectively turning
IT into a pay-per-use utility. However, when IT becomes a utility, technology
reselling partners are financially impacted by an ever improving self-service
model, subscription pricing and the need to differentiate when their
competitors are effectively offering the same utility. In this seven part
series we look at how partners can package their own intellectual property (IP)
assets to effectively differentiate and regain revenue lost to the cloud model.
parts 1- 6, we looked how to identify your IP assets, chose the features that
will align to specific customer scenarios and package them up. Here, we look at
how to price your new product.
consideration the value of your product to the customer, your competition's
offerings, the pull through effect on the rest of your business and common
sense, the price for your packaged IP ought to be whatever the market will
there are several pricing strategies that can also be used:
product generates or saves the customer money then it may be possible to price
your product on the basis of the value it delivers. A good rule for justifying
an investment is that it will generate a 10:1 return. Of course common sense
needs to be applied if the one time methodology returns vast amounts over a
long period of time. For example, if your BI implementation methodology results
in generating an incremental $100M in revenue to a customer, it would be hard
to charge them $10M for the service. But the business case for the investment
would be strong.
product is better than existing products offered by your competitors, then you
may want to price it relative to what they are charging. One strategy is to
offer a better product at the same price as the competition does an inferior
one so that customers perceive greater value in your offering.
If you have
made a significant investment in developing and packaging your product then you
may want to get a return on that investment in a predetermined time. Assumptions
can be made about how many sales will take place over that predetermined time;
you can then price the product accordingly.
if the BI assessment service cost $50,000 to package and it takes 10 man-days
to deliver at your cost of $1000 per man-day then if you charge $20,000 for the
assessment, your profit will be $10,000 per assessment. Therefore, it will take
5 assessments to recoup the cost of packaging. If you expect to do one
assessment per month, then it will take 5 months to recoup your investment.
product has a pull-through effect on other products and services your company
sells then you may consider offering it for free, at low cost or applying its
value as a credit towards a bigger purchase from you. Assessments are often
priced this way.
if your BI assessment is valued at $20,000 and your average BI solution costs
$400,000 Then you may want to make the offer to the customer that the cost of
the assessment, or some portion of it, will be credited to them if they go
ahead with the BI solution with you. Otherwise they would pay the full amount.
The value added work your
company has done for customers over many projects is your potential source of
intellectual property. By packaging these assets as standardized products that
can be sold repeatedly, this IP can provide your company with market
differentiation and become a source of new revenue.
Combining this IP with a
higher level of vertical industry knowledge and business processes expertise
that helps customers better address their business challenges can lead to new
and more profitable revenue streams for your company.
At a time of technology
disruptions, these assets, which you control, may become essential to your
business' continued longevity.
Note: If you would like the complete white paper, email the author: email@example.com
If you are attending the Microsoft Worldwide Partner Conference in
Washington D.C. you are invited to attend the session: "Differentiate
Your US Partner Business by Packaging Your Own Intellectual Property" on
Tuesday, July 15, 2014, 1:00 - 2:00 p.m.
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