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Enterprise Software: Aggressive Competition Pushing Enterprise Software Prices Down
Price competition has driven prices of enterprise hardware and software down by as much as 11 percent since 2012, and prices are down 17 percent since the end of 2011, Synergy Research Group found.
Jeremy Duke, President of Synergy Research Group, said that “Some of the price declines have been quite brutal. Down in the trenches, you can see where some vendors are quite deliberately pushing prices down to gain a competitive edge, but also at a high level the market is reacting to the disruptive impact of software based solutions and cloud. Enterprise vendors will need to get creative in order to protect revenues and margins.”
Peter Goldmacher, analyst at Cowen & Co., said that “eventually, every budget-strapped IT department will be in the market to update their enterprise software or be forced to free up dollars in order to invest in other value-added projects. On premise legacy systems are therefore ripe for displacement if these cost savings are actually being realized from SaaS and emerging database alternatives.” The Goldmacher report found that when customizations aren’t necessary that SaaS software can be as much as 50 percent cheaper than similar on-premise software.
Vendors, like Oracle, on the high-end of pricing are particularly vulnerable. Pricing pressures on Business Intelligence (BI) software in June led Oracle to slash prices by 30 percent. Boris Evelson, a Forrester analyst, told IDG News that “as far as I am concerned there’s huge competition in the BI market, from both traditional vendors and tons of newcomers. I track [more than] 20 vendors who can more or less provide similar functionality. I can’t imagine why there wouldn’t be huge price pressures on all BI vendors.”
