BI Vendors Get Failing Grade on Pricing

Business intelligence vendors must make their software more affordable—and provide better service once it’s been sold

In almost all software markets, there’s a kind of avoidance cycle at work: In each new product release or iteration, vendors pack in more features and (typically) enhance existing functionality. At the same time, however, software vendors rarely, if ever, adjust their pricing—at least, not downward.

In fact, there’s a sneaking suspicion among many users that ISVs often exploit new software releases as an excuse to revise their pricing upward. This is where the avoidance comes into play: given a choice between sexy new features or more affordable software, customers will probably choose the latter at least half the time. Software vendors know this, of course, and typically justify the increased cost of their products on the basis of the new features and functionality improvements they’ve made—which, once again, not all customers want.

Take Craig Somberg, an independent business intelligence integrator who has consulted for a prominent home-design firm and a well-known Wall Street brokerage house. Most of the business intelligence vendors he works with do a good job of delivering feature-complete and highly functional tools, Somberg says, but receive a failing grade on the issue of pricing.

“I personally feel the costs for enterprise level licensing to be exorbitant with the BI vendors. There is no issue spending X dollars for the base product, but when the BI vendor is asking an equally high value for ‘per user’ or ‘concurrent licensing,’ it puts stresses on the community to come up with creative programming practices to reduce the rape and pillage,” he comments.

Somberg isn’t alone. A number of business intelligence professionals report that when it comes to soliciting feedback from users, BI vendors often have selective hearing. Consider report developer Jeremy Hilden, who says that his organization, which he asks that we not identify, has yet to upgrade to the major new release of a prominent end-user reporting tool. Not surprisingly, Hilden says he would rather see this vendor focus on improving its service and support and lowering its prices than continue to incorporate whiz-bang new features.

“I am unsatisfied with [the vendor] always wanting a special costly service agreement to support the product,” he says.

Bearden Barnes, a data warehouse manager with an office and furniture wholesaler based in the Southeast, agrees.

“We tried to negotiate with [a prominent business intelligence vendor] near the end of last year to purchase additional CPU licenses,” he explains, “but their deeply-discounted-end-of-year pricing was about double what I could convince management to spend. We walked away from that offer but aren't giving up yet.”

That’s in spite of the fact that this vendor has announced plans to raise its prices by one-fifth in 2005, Barnes says. The reason? It recently delivered a new platform release that boasts new features and enhanced functionality. “The justification we heard from our rep was that the increase is based on the added functionality delivered in the [new] platform,” he says. “It seems that they're not headed in the direction [that] I and other customers would like them to go.”

Even users who say they have excellent relationships with their primary business intelligence vendors aren’t above kvetching when it comes to pricing.

“My only gripe with [our vendor] is their cost. There are numerous [vendor-specific] components which we don't license as we can't guarantee that they will provide a guaranteed ROI,” says BI programmer Arthur Tabachneck, who stresses that he has “no problem” with his vendor’s licensing terms. "I would have to think that my company isn't the only one facing the same dilemma.”

A surprising number of users fault the service and support of the major business intelligence vendors, which they say is typically costly and leaves much to be desired. “I find vendor service and support primarily directed to corporate clients with large budgets, inadequate education, training, and skill for difficult data integration and analysis work, and in need of packaged solutions,” says Sigurd Hermansen, a business intelligence solution developer with a private sector applied research firm. “Training and technical support seems more a profit center for the vendor.”

When it comes to pricing, Hermansen says, forget about it. “Vendors make it difficult to understand what capabilities require what product licenses. It takes too much negotiation to get to a final licensing cost.”

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.