If you are an ISV in the Microsoft cloud dynamics community, you probably do not like subscription pricing. You probably feel that under a subscription pricing licensing agreement you are not being adequately compensated for your significant investment and continuing operating expenses.

However, you are also a decent businessperson and you realize the market is changing. The customers in your market like subscription pricing. It is attractive to them for a number of reasons. RoseASP refers this as a paradigm shift. To you, it is a change in your business model. You’re being pressured to change from licensing your software for perpetuity and being paid for that all up front, to licensing on a monthly basis; month after month, after month. It is a big change.

There are a number of issues with the change. One of the biggest is pricing. Properly pricing your software and to make it attractive in the market and make it worthwhile to continue developing and supporting your product with cloud dynamics is the main concern.

This approach to pricing is based primarily on the fact that you are changing from a perpetual license, to a monthly license, and based on RoseASP, of what is happening in the Dynamics community.

Some minimum pricing and maximum pricing practices observed by cloud dynamics are: 
Let us look at an example:

Assumptions:

The ISV product used to be sold with a perpetual license for $5,000, plus an annual enhancement fee of 20%. In addition, this pricing represented a fair price for your product.

The minimum pricing seen in this scenario is based on a three-year payback:

Initial Purchase $ 5,000
First Year Enhancement 1,000
2nd Year Enhancement 1,000
Third Year Enhancement 1,000
Total $ 8,000
Monthly (36 months) $ 222

The maximum pricing seen in this scenario is based on a payback of 18 months:

Initial Purchase $ 5,000
First Year Enhancement 1,000
Second Year Enhancement (1/2 year) 500
Total $6,500
Monthly (18 months) $ 361
In this case, if you are asking less than $222/month, then you are under pricing your product. If you are asking more than $361/month, then think you are overpricing your product.

According to RoseASP, pricing in any situation is a difficult business exercise, requiring many considerations about your costs, your competition, your product, and your company’s market position.

If you are not already offering subscription pricing, you probably will be in the near future.

If you are already offering subscription pricing, do not be afraid to change your pricing. It is a new business model for you, and you can change your mind.

To find more about the Microsoft cloud dynamics, visit - http://roseasp.com/cloud-partners

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