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Cloud Call Center Community Featured Article

[June 24, 2005]

Airframe’s CRM Utility Pricing Idea

Airframe’s “utility pricing” has no hidden charges, but maybe hidden drawbacks.

By DAVID SIMS
TMCnet CRM Alert Columnist

The more this reporter considers Airframe Business Software’s idea to offer metered-use CRM the better it looks – although there are a couple possible drawbacks.

A couple days ago Airframe announced the 3.0 release of its immediate-use on-demand applications, using what Airframe calls “utility pricing” – in other words, pay-as-you-go, like in a metered taxi ride.

It’s not a new idea, but this is the first instance this reporter’s seen of it applied in CRM or ERP offerings marketed primarily at SMBs. An IDC study published in March titled “Industry Perspectives on Utility Pricing of Software” looks at the concept of “utility pricing” and “presents empirical data that demonstrates there is, in the software industry, both interest and skepticism around utility pricing.”


Most examples of IT utility pricing models in existence today are for systems and storage products rather than software, the IDC abstract notes: “However, this is changing as customer interest in utility pricing of software grows, technologies to meter software proliferate, and software vendors increasingly offer customers a range of software purchase options.”

The package, Airframe Express, consists of three 100% web-hosted applications: CRM Express, HR Express, and Help Desk Express. Geared to small to mid-sized businesses (emphasis probably on the lower end), they’re intended to solve the usual issues around customer relationships, human resources, IT and asset management.

As with salesforce.com’s introduction of the subscription model of software delivery, Airframe announced a pure utility-style pricing for all its products. Customers pay not per seat per month, but only for their actual usage of the system, with subscription fees calculated daily and billed monthly. The current subscription price is $39 per user, but that’s promotional, it’ll go up soon.

Robert Gryphon, Airframe's founder and CEO and the founder of Octane Software, says that it’s not enough to offer flexibility to choose the applications and services customers can choose from, any on-demand provider can do that, companies need to offer “flexibility in the way (customers) pay for applications. Like an electric bill or usage-based cell phone plan, Airframe Express is priced based on actual, not predicted usage.”

Zaki Farhat, president of Airframe customer Cetec, which provides “comprehensive Workforce Management Systems to a customer base of Fortune 500 companies,” according to Farhat, reported using Airframe is “10 percent of the cost and complexity of traditional enterprise software.”

It’s like what Sun’s doing – this February Sun announced a “global utility grid,” where Stuart Wells, VP of Strategic Development and Sun Financing, defines “utility” as “the ability to use only what you need when you need it, and pay only for what you use.”

Other so-called utilities offered today “are really just fancy financing options,” Wells says. “They're like a car lease where your payments fluctuate with the number of miles you travel per month. This method of financing does allow you to avoid upfront capital expenditure, but most of these deals require custom contracts that lock you in for years, eliminating your ability to dial up and dial down that computing environment.”

The Airframe model is great for businesses with lots of seasonal workers. "If you plan a big marketing push for July and August and will be using summer interns recruited from school, you'll be able to add 10 or 50 seats, not just for those months, but only for the actual days the interns work," Olivier Delerm, vice president of product marketing tells Marshall Lager.

It’s also a good way to test-drive products without locking in to long-term contracts. The downside is that since it is so minutely priced, company bean-counters will inevitably get persnickety about who’s racking up the most charges. It’s in their DNA, it’ll happen.

When it’s one price for all you can use, the system gets used more and, presumably, companies extract more benefit. When it costs depending on use, the subtle – or not so subtle – vibes from cost-conscious management are naturally going to be to use it as little as possible, which would defeat much of the point of having the system in the first place.

-----

David Sims is contributing editor for TMCnet. For more articles by David Sims, please visit:

http://www.tmcnet.com/tmcnet/columnists/columnist.aspx?id=100005&nm=David%20
Sims

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