Magazine article Management Today

A Hard Look at Software

Magazine article Management Today

A Hard Look at Software

Article excerpt

As computer prices plunge and desktop PCs proliferate, customers often ask why software costs have not fallen in line with hardware. Graham Taylor, software business development manager at ICL, explains how software pricing it changing

Every couple of years, the microprocessors that drive the latest generation of computers become twic as powerful for half the cost of their predecessors. Such technological advance, combined with the large volume of PC s now being shipped, has resulted in substantial reductions to the cost of hardware production. These savings have been passed on to customers in the form of plunging hardware prices.

The same has not happened with most software. True, there have been some significant price cuts in PC packages, thanks to their huge volumes and global market. CA SuperCalc, for example, plummeted from 379 [pounds] to 79 [pounds] two years ago. But big price reductions are still unusual in mainstream business software. This is because developing such applications is a labour intensive task. A high degree of business expertise and programming skill is required even with the latest software development tools. volumes are limited by the need for most business software to be adapted for different industries, business cultures and legal systems, and to be translated into other languages.

However, the software industry has recognised that there is a need for new pricing structures. For example, software prices have traditionally been set according to power of the hardware being used. A suite of accountancy programs would therefore be cheaper to run on a minicomputer than a mainframe, irrespective of how many accountants used it. The price would be still lower if the software was bought to run on PCs. But at a time when users want the flexibility to run software applications across a number of connected systems, this approach looks increasingly outdated.

An alternative approach is to look at the number of staff using the software -- office employees with PCs on their desks, or numbers of staff using supermarket check-out tills. However, this method does not always work. Supermarkets employ large numbers of part-time workers, several of whom may use the same check-out till during one day. Here the solution may be to base pricing on equipment rather than individuals--the number of check-out lanes in a supermarket or cashier points in a branch bank. …

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