Four Keys to Fair Software Pricing
Last updated: June 21, 2024 Read in fullscreen view
Recommended for you
- 01 Aug 2024
The Standish Group report 83.9% of IT projects partially or completely fail 162/1787 - 13 Apr 2024 Lessons on Teamwork and Leadership from Chinese story book "Journey to the West" 45/954
- 07 Jul 2024 Top Fintech Companies in Vietnam Driving Innovation Across Digital Banking & Investment 29/54
- 02 Nov 2021 What is Terms of Reference (ToR)? 25/1471
- 18 Oct 2020 How to use the "Knowns" and "Unknowns" technique to manage assumptions 22/995
- 01 Oct 2020 Fail fast, learn faster with Agile methodology 15/977
- 03 Apr 2022 Microsoft Solutions Framework (MSF) 15/1163
- 24 Nov 2025 Top Blockchain Companies in Vietnam 11/29
- 12 Oct 2022 14 Common Reasons Software Projects Fail (And How To Avoid Them) 11/506
- 15 Oct 2022 Project-based team model for one-off and pilot software development projects 11/734
- 03 Oct 2020 Outsourcing Your MVP Development - Streamlined Solutions for future 10/404
- 05 Aug 2025 Why Doesn’t South Korea Outsource Its IT Projects Like Other Developed Countries? 10/83
- 18 Dec 2023 The Cone of Uncertainty in Scrum & Requirement Definition 9/648
- 21 Aug 2025 Top 30 Oldest IT Outsourcing Companies in Vietnam 8/91
- 19 Oct 2021 Is gold plating good or bad in project management? 8/756
- 18 Oct 2021 Key Elements to Ramping Up a Large Team 8/1116
- 10 Nov 2022 Poor Code Indicators and How to Improve Your Code? 8/214
- 06 Feb 2021 Why fail fast and learn fast? 7/378
- 24 Nov 2021 What is the Actual Cost of Hiring Cheap Developers? 7/350
- 22 Mar 2022 8 Mistakes Marketing Agencies or Consulting Firms Make When Outsourcing Web Development 7/325
- 13 Oct 2021 Outsourcing Software Development: MVP, Proof of Concept (POC) and Prototyping. Which is better? 7/427
- 25 Sep 2025 A Practical Guide to Secure Online Work for Outsourced Teams 7/59
- 07 Oct 2025 Case Study: Using the “Messaging House” Framework to Build a Digital Transformation Roadmap 7/55
- 31 Oct 2025 The True ROI of Software Development Outsourcing for Tech Startups 7/59
- 01 Mar 2023 Bug Prioritization - What are the 5 levels of priority? 6/207
- 12 May 2021 The Real Cost Between Outsourcing IT vs In-House: A Quick Comparison 6/404
- 10 May 2021 Project Audit and Second Opinion Services 6/237
- 28 Jul 2022 POC, Prototypes, Pilots and MVP: What Are the Differences? 6/612
- 18 Aug 2022 What are the consequences of poor requirements with software development projects? 5/244
- 04 Oct 2022 Which ERP implementation strategy is right for your business? 5/279
- 14 Dec 2021 The Top 10 Problems with Outsourcing Implementation and How to Solve Them 5/377
- 02 May 2021 Outsourcing Software Development: Avoid 8 Mistakes 5/91
- 12 Dec 2021 Zero Sum Games Agile vs. Waterfall Project Management Methods 5/377
- 31 Aug 2022 What are the best practices for software contract negotiations? 5/215
- 09 Jan 2021 How can outsourcing enable business agility? 5/182
- 14 Oct 2021 Advantages and Disadvantages of Time and Material Contract (T&M) 5/795
- 05 Mar 2021 How do you minimize risks when you outsource software development? 5/318
- 01 Jan 2024 12 reasons for software development outsourcing 5/148
- 05 Jan 2022 What Outsourcing Engagement Model is Right For You? 5/290
- 20 Jul 2022 Software Myths and Realities 5/802
- 11 Mar 2023 Common Pain Points in Software Development Outsourcing 5/228
- 07 Nov 2024 Outsourcing Crisis Looming: Will Trump's Policies Transform the Global IT Landscape? 4/160
- 21 Oct 2021 Advantages and Disadvantages of IT Outsourcing 4/323
- 19 Mar 2021 Selective Outsourcing of IT Functions - a new trend in business outsourcing 4/497
- 08 Oct 2022 KPI - The New Leadership 4/558
- 18 Jul 2021 How To Ramp Up An Offshore Software Development Team Quickly 4/519
- 31 Oct 2021 Tips to Fail Fast With Outsourcing 4/377
- 17 Feb 2022 Prioritizing Software Requirements with Kano Analysis 3/285
- 01 Sep 2019 Outsourcing Software To Vietnam: Facts, benefits and limitations 3/397
- 16 Dec 2021 Why outsource Python development of your project? 3/445
- 12 Jan 2023 Top 10 Trustworthy IT Outsourcing Companies in Vietnam 3/262
- 04 Jan 2021 VIETNAM AS A BIG ATTRACTIVE DESTINATION IN THE FIELD OF OUTSOURCING 3/277
- 01 Jan 2023 Why is Vietnam the Top IT Outsourcing Destination of 2023? 3/204
- 01 Oct 2022 Vietnam is a favorite supply of IT outsourcing services to Japan 3/231
- 15 May 2022 20 Common Mistakes Made by New or Inexperienced Project Managers 3/248
- 03 Jan 2023 IT Outsourcing Costs: Is outsourcing really cost-effective? 3/187
- 08 Feb 2022 Software Development: Fixed Cost or Opportunity Cost? 3/445
- 14 Jun 2022 Example and Excel template of a RACI chart in Software Development 3/710
- 07 Jul 2022 Managing Project Execution Terms 3/379
- 23 Sep 2021 INFOGRAPHIC: Top 9 Software Outsourcing Mistakes 3/413
- 10 May 2021 What are things you should look for in a good IT outsourcing company? 3/407
- 13 Dec 2020 Move fast, fail fast, fail-safe 3/294
- 28 Dec 2021 8 types of pricing models in software development outsourcing 3/419
- 28 Oct 2022 Build Operate Transfer (B.O.T) Model in Software Outsourcing 3/365
- 28 Oct 2022 Expect the unexpected in 2023 - How Outsourcing Can Help? 3/185
- 04 Oct 2021 Product Validation: The Key to Developing the Best Product Possible 3/296
- 17 Oct 2020 How Outsourcing can Improve Time Management for Better Business 3/186
- 05 Sep 2023 The Cold Start Problem: How to Start and Scale Network Effects 3/167
- 26 Sep 2024 Successful Project Management Techniques You Need to Look Out For 3/369
- 10 Apr 2024 The Parking Lot Method: Unlocking a Simple Secret to Supercharge Your Productivity 3/403
- 01 Jan 2024 Tech Partnerships: Choosing the Right Software Outsourcing Firm in Vietnam 3/166
- 08 Oct 2024 Vietnam: The Rising Star in Global Outsourcing – Trends and Costs for 2025 3/295
- 14 Feb 2024 Systems Engineering Tools in Requirements Development 3/265
- 02 May 2022 What Is RAID in Project Management? (With Pros and Cons) 3/736
- 24 Nov 2023 The project management paradox: Achieving MORE by doing LESS 3/194
- 06 Oct 2021 Intellectual property issues with outsourcing software development 3/365
- 12 Aug 2022 What is End-to-end project management? 3/383
- 01 Jan 2023 Software Development Outsourcing Trends to Watch Out for in 2023 3/273
- 01 Jan 2023 4 New IT Outsourcing Pricing Models to consider in 2023 3/323
- 10 Dec 2023 Pain points of User Acceptance Testing (UAT) 3/418
- 03 Nov 2021 7 phases of Odoo Implementation and Development: Can they be outsourced? 3/358
- 01 Jan 2024 Software Outsourcing Questions for 2024 3/145
- 01 Dec 2023 Laws of Project Management 3/250
- 21 Oct 2022 Outsourcing Billable Rate 3/245
- 05 Jun 2023 Fractional, Part-Time (virtual) or Interim CTO: Who Will Cover Your Business Needs? 2/109
- 01 Jan 2024 Hiring Tech Talents in Asia: An Overview of Skills, Costs, and Potential 2/149
- 11 Mar 2024 Why You Should Hire Odoo Developers from Vietnam to Customize Your ERP System 2/91
- 01 May 2024 Warren Buffett’s Golden Rule for Digital Transformation: Avoiding Tech Overload 2/188
- 03 Jul 2022 What is the difference between Project Proposal and Software Requirements Specification (SRS) in software engineering? 2/959
- 19 Apr 2021 7 Most Common Time-Wasters For Software Development 2/527
- 27 Jan 2020 Should a project manager push developers to work more hours due to mistakes of manager schedule setting? 2/414
- 13 Oct 2021 Why Outsourcing Software Development Services Is Gaining Traction With Non-Technical Leaders? 2/300
- 08 Aug 2021 Why Nearshore Software Development is better than In-House Development? 2/177
- 15 Aug 2021 TIGO Rate Formula - Things the partners should know 2/423
- 31 Dec 2021 Outsourcing Software Development to mitigate the impact of COVID-19 1/290
- 21 Aug 2022 Forbes: IT Outsourcing Hotspot: Vietnam, A Small But Mighty Powerhouse 1/243
- 09 Sep 2022 Close Collaboration and Communication Can Overcome the Challenges of Distributed Teams 1/134
- 22 May 2022 What are common mistakes that new or inexperienced managers make? 1/243
- 13 Jan 2023 What are the Hourly Rates in Offshore Software Development? 1/224
- 01 Oct 2024 23 Overlooked Types of Non-Functional Requirements You Shouldn’t Ignore 1/19
- 01 Jun 2025 10 Sustainable & Unique IT Outsourcing Companies in Vietnam 1/62
- 04 Apr 2024 Unlock Vietnamese-Japanese outsourcing potential 1/215
- 01 Mar 2024 10 Project Management Myths 1/122
- 12 Aug 2024 Understanding Google Analytics in Mumbai: A Beginner's Guide 1/85
- 11 Jan 2024 What are the Benefits and Limitations of Augmented Intelligence? 1/436
- 01 Jan 2024 What The World Is Flat Means to IT Outsourcing 1/159
- 26 Dec 2023 Improving Meeting Effectiveness Through the Six Thinking Hats 1/205
- 05 Jan 2024 Easy ASANA tips & tricks for you and your team 1/181
- 17 Jan 2024 What are the benefits and challenges of using multi-sourcing or single-sourcing strategies? 1/157
- 01 May 2023 Streamline Your Business with Outsourcing 1/170
- 10 Jan 2024 Facts Chart: Reasons for outsourcing 1/133
- 02 Mar 2021 Estimate the Cost of Software Development 1/313
- 01 Mar 2022 Top 5 reasons why outsourcing to Vietnam is a smart move 1/262
- 01 Apr 2021 IT Outsourcing to vietnam: Why It Is A Good Choice? 1/260
- 07 Dec 2023 12 project management myths to avoid 1/169
- 02 Nov 2023 What are the pros and cons of iIT outsourcing? 1/185
- 02 Nov 2022 Difference between Change Management and Project Management /216
- 01 Jan 2023 Top Software Development Challenges in 2023 /280
- 30 Nov 2023 Project Managers, Focus on Outcomes — Not Deliverables /143
- 15 Nov 2023 IT Staff Augmentation Types and the Best Choice for Your Business /156
- 06 Jun 2022 Change Management at the Project Level /293
- 01 Jan 2023 Top 5 IT outsourcing countries in 2023 /254
- 01 Feb 2023 [InfoWorld] Is your outsourcer agile enough? /183
- 08 Jan 2024 Outsourcing on an As-Needed Basis /144
- 01 Aug 2022 Is planning "set it and forget it" or "set it and check it"? /264
- 02 Jun 2024 Reviving Ancient Wisdom: The Spiritual Side of Project Management /204
- 14 Mar 2024 Why should you opt for software localization from a professional agency? /117
- 12 Mar 2024 How do you create FOMO in software prospects? /131
- 23 Jun 2024 Best Practices for Managing Project Escalations /184
- 21 Jun 2024 Dead Horses and the Escalation of Commitment /124
- 06 Mar 2024 [SemRush] What Are LSI Keywords & Why They Don‘t Matter /131
- 03 Jan 2023 Organizing your agile teams? Think about M.A.T (Mastery, Autonomy, Purpose) /333
- 02 Dec 2021 3 Ways to Avoid Scope Creep in IT Consulting /192
- 09 May 2022 Build one to throw away vs Second-system effect: What are differences? /299
- 10 May 2022 Levels of Teamwork /180
- 10 Mar 2021 The 7 Biggest Mistakes to Avoid Before Outsourcing a Web Development Project /224
- 25 Nov 2021 Low-Cost Software Development: Buy Nice or Buy Twice? /278
- 16 Mar 2021 Outsource Data Engineering Services - TIGO Streamlined Solutions /236
- 19 Oct 2021 Software development life cycles /628
- 12 Oct 2021 Vietnam outsourcing path - the silk road connecting ASEAN with the developed countries (EU, US, Japan...) /283
- 17 Oct 2021 Does Fast Tracking increase project cost? /350
- 03 Nov 2022 Top questions and answers you must know before ask for software outsourcing /265
- 06 Nov 2019 How to Access Software Project Size? /236
- 13 Jan 2020 Quiz: Test your understanding project cost management /568
- 19 Oct 2020 The hidden costs of outsourcing software development /434
IMHO, too many vendors complicate software pricing. Rather than providing a clear, fair price for their customers, software vendors often charge different prices for different hardware configurations, make customers pay for modules they don’t need, and surprise customers with hidden fees when they make even the tiniest change to their hardware platform.
If I could talk collectively to the IBM software industry, here’s the advice I’d give on the ideal way to price software products for both the vendor’s and the customer’s own good. And for customers, look for these items in any IBM isoftware packages you purchase to get a better deal before you buy.
Provide straight-forward, flat pricing with no haggling
Set a fair price that covers development costs, technical support, and other associated costs, along with profit. Then charge everyone that same price.
Don’t punish customers running more powerful machines by setting pricing at different tier levels or charging one price when they’re using four processors and another price when they’re using five processors. Don’t charge more based on the number of output queues, the number of users, or any other arbitrary measurement. And don’t haggle with your customers. When you give a great deal to one customer, you’re relying on other customers making up that revenue through a higher price. Don’t play favorites.
Software pricing should be fair, consistent, and affordable. If the customer truly sees the ROI in your software, you shouldn’t have a problem selling it.
Freeze software maintenance when a customer purchases your software
Many companies tack on yearly software maintenance increases so that over time, their customers’ yearly maintenance cost approaches what the customer originally paid for the software. This practice serves as a retroactive price hike.
Fix your customer’s annual maintenance costs when they purchase your software, and keep it at that price as long as they keep their maintenance active.
I also think software companies shouldn’t charge maintenance for the first year after a customer buys the product. The first year’s maintenance should be included in the purchase price.
Make it easy for customers to upgrade their hardware
Don’t charge license transfer fees when the customer upgrades their machine. Hardware upgrades shouldn’t be revenue events.
There’s no reason to collect a check when the customer moves your software from a Power 7 to a Power 8 machine or when they activate another processor. IBM software doesn’t take any special tweaking to run the same package on different processors, and new software keys are easy to produce.
Updated software keys should come with a smile, not an invoice. Software should be transferable when the customer changes machines.
Don’t make your customers pay for capabilities they don’t need
Make your software as modular as possible so customers can select and purchase only the capabilities they need. This gives them more freedom in what they buy. Modular software also provides an opportunity later on to make add-on purchases by buying additional modules.
In my experience, these are some of the better techniques for pricing software. I use them in my own software pricing and they work well for us and for our customers. If you’re a vendor, I encourage you to try these techniques out. If you’re a customer, I believe you’re better off buying from companies that believe in these principles.
Explore more on these topics
26072024043639_thumb.jpg){kind=spacer}
Guest Blogging: The Definitive Guide
Top Trending Topics
Share This
Link copied!