Low prices by themselves rarely help establish industry leadership, unless they are also backed by product quality and general availability Wal-Mart's EDLP worked because other retailers continued to play games with loss-leaders and seasonal sales. EDLP told customers you decide when it is time to buy, not the retailer. EDLP also extended to branded products, not just house or crappy products. In US aviation, Southwest has done something similar. Fair pricing even at the last minute. No matter where you are going. Their max fare, one way, anywhere in system is $ 339 (of course, if you plan ahead, it is much cheaper). It's the "no fine print" that helps establish customer comfort and as a consequence, industry leadership.
People say Marc is a marketing genius with his "End of Software" slogan. Others credit his passion. To me his huge contribution to the software industry is minimization of excuses and exceptions. It is an industry filled with caveats and finger-pointing. Talk about expensive TCO and most software vendors blame the systems integrators. Or pretend it is much lower than it is. (At last week's Software 2007 conference an SAP executive said I was dead wrong on a slide which said amortized costs of an SAP system over 5 years are $ 1,000+ per user a month. License, maintenance for 5 years, 2 upgrades, hosting, functional and technical support staff for 5 years and the initial implementation by Deloitte and more - do the math)
SLA? You kidding me - you get a 30 day warranty - what more do you need? Single proposal for the whole implementation - how about 3? One for software, one for training, one for consulting. Likely from different sales people. Discounts all over the place. Vertical engines priced opportunistically.
Marc's model says I am the single throat to choke. Upgrades, bug fixes, up-time, response time, software functionality - I am the man. And you can see my performance transparently on my site. At $ 100 a user a month (or less).
Can Marc stay on this path? With his Oracle DNA, I do worry about his not staying disciplined. He could tack all kinds of fees. Let Wall Street, more than the customer, set his vision. I do hope he gets his inspiration from outside the industry. From Bentonville and Dallas.
I was recently talking to an executive at one of the larger software vendors. His comment "what's the big deal with SaaS pricing? Most customers will pay us more in the long run". One fundamental flaw in his thinking. Customers will not pay for SaaS at his rates. They will at Marc's rates.
Price leadership has moved on in the software industry. And even more importantly so have expectations of availability and quality. It's EDLP on branded products.
You are now free to move about the industry. Ding.
