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Michael Baum has a lot on his mind. The president of Relavis, a New York-based developer of CRM tools, Baum has to help his company respond to shrinking software margins, increased competition from companies small and large-including a particularly formidable one in Redmond, Wash.-and customers' spiraling demands. But Baum and resellers like him have another, major issue to deal with: software vendors who have made some significant structural pricing moves. Taken as a whole, they essentially mean there's no turning back from services, leasing and maintenance contracts; they are the wave of the future. "We've been using value-added services to help customers manage their organizational changes for awhile, but now we're starting to promote, market and advertise them more," Baum says.
When Microsoft unveiled its Software Assurance program last summer, it was merely the first strike in a wave of vendor assaults on old pricing models. Microsoft unveiled the program with considerable fanfare, and industry observers greeted it with a familiar dose of consternation. That was partly because every announcement emanating from Redmond is viewed with at least a little suspicion. But it also was because people are instinctively leery of change, especially when it hits their pocketbooks.
Unfortunately for them, the whole world of software licensing is changing, affecting literally millions of people who buy and sell software for a living. For them, Microsoft's recent change is only the tip-albeit a big tip-of the iceberg. Changes going on elsewhere portend that software licensing and the pricing landscape will look drastically different very soon. For example, Computer Associates, an Islandia, N.Y.-based software giant, has been hyping its FlexSelect model for months. The plan offers customers month-to- month and metric-based licensing, features that will appeal to any organization with tighter purse strings. Oracle, too, is also making modifications. In January, the Redwood Shores, Calif., database giant unveiled its All-in-One pricing plan, which gives midmarket customers an up-front quote for the cost of buying, installing and maintaining its 11i E-Business Suite. IBM, meanwhile, recently launched a new pricing model for its WebSphere Express server that was specifically aligned to how the midmarket buys its software, providing a fixed cost per user and a simplified pricing model. Others contemplating changes include Sun Microsystems, which is getting ready...