IT in the Ad Biz

Apr 11 2008   3:16PM GMT

Paying Attention to Pricing Models

JohnWilder John Wilder Profile: JohnWilder

Over the last several days, I’ve gotten pretty worked up over some vendor pricing models. I understand that vendors are attempting to recoup the investment they have in developing their products, but unfortunately the pricing model vendors may choose to adopt can hit you particularly hard. It’s opened my eyes to this particular issue, and I’m going to pay a whole lot more attention to it going forward.

How would we like it if Cisco or HP suddenly decided to adopt a new pricing model for their network switches? What if this new pricing model required that we had to pay more based on the volume of data moving through the switch? This model would be prohibitively expensive for those of us who routinely move big Photoshop files around. It also doesn’t make a lot of sense, because it’s the same switch whether you’re moving around Word documents or Photoshop files. Thankfully, things don’t work that way in the switch world. You purchase the switch you need, and pricing varies depending on the switch’s speed and the number of ports. The pricing model makes sense.

This brings me to a couple of vendors who apply a different model in order to recoup their development costs. For the past several months I’ve been in discussions with Bakbone about their backup products. Bakbone uses a pricing model where you’re asked to pay based on the volume of data you’re backing up. We’ve also purchased network acceleration devices from Expand Networks in the past 12 months. In Expand’s case, the pricing model is based on the amount of bandwidth being accelerated. In both cases, the smaller company which has large storage and bandwidth needs is penalized. The pricing model works a whole lot better if you’re saving and moving Word documents than it does for Photoshop documents.

In the case of backup software, if I’ve already spent the money for the drive space to store my backups, why on earth should I have to pay a software vendor based on how much data I’m backing up? Does the software have to work any harder in order to back up more stuff? In the case of network acceleration, if I’ve already purchased a piece of hardware which is sufficient for my bandwidth needs, why do I have to pay more to accelerate 20MBps than I do to accelerate 10MBps? The hardware hasn’t changed. I’m already paying my ISP for the bandwidth. Isn’t the whole idea of a network acceleration device that I get more bandwidth for the buck? It feels to me like I’m paying for that extra bandwidth either way.

For a company such as ours, where our data and bandwidth needs tend to be excessive, and out of proportion to other companies of our size, these pricing models are prohibitively expensive. A pricing model based on users or connections makes much more sense for us. It’s been a good lesson for me. In the case of Expand we’ve been very happy with the product itself. Their network acceleration appliances work well, and we’ve managed to work out the pricing issues so far. However, this could be an ongoing battle as our company grows, and I don’t particularly relish the thought of revisiting these pricing issues every time we add an office or renew our support contracts.

It’s been a valuable lesson learned for me, and it’s one I’ll pay a lot more attention to in the future. Because our storage and bandwidth needs are out of proportion to our size, basing a pricing model on these elements just doesn’t work for us.

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