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Thursday, August 25, 2005

TIBCO & Time Based Pricing

Jason Stamper earlier scooped about the integration vendor Tibco's plans to roll out a rental-style pricing model last week. Tibco says that this applies to all products and will be made available to all customers - both new and existing. The company is already incrementally rolling out its "Time-Based" pricing model, which enables customers to pay for a bundle of software, services and maintenance over time. Vivek Ranadive insists that it in no way replaces its more traditional license sales model, but rather is complementary. As it already makes substantial% of its revenue from a combination of ongoing maintenance revenue and services – this move is not to be seen in place of Tibco's traditional software sales, but in addition to. This is not a wholesale move to subscriptions - some customers who may prefer to consume software packaged with services on a more utility-style basis, they now have that option.
Tibco thinks that Time-Based pricing model is likely to appeal to most to new customers in Asia Pacific - where monthly pricing is very popular - or smaller enterprises for whom an up-front payment may be less attractive than paying over time. It may help in getting new type of customers and additional revenue channel for Tibco. This is indeed a significant move – one that certainly others are bound to imitate –particularly in the SME segment. It needs to be seen how the pricing is structured including collection mechanism and how Tibco’s traditional partners react to this. Also to observe is the fact what happens to defaulters and enterprises that jump in and out of the schemes. The locking cost, jump out & switching costs need to be understood in greater detail. In traditional economics, leasing may be cheaper than rental pay structures. The pressures of competition & pricing makes companies try out new models – thees sometimes force companies to think for the customers as well – no more proof is needed to be convinced about massive changes that are bound to happen in the enterprise landscape

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