Posted by John Stokdyk, Technology editor
As a technology journalist, one of the first questions I was taught to ask is, "How much does it cost?" How simple-minded can you be? Over the years I've wasted huge amounts of my working life trying to pin down obscure pricing quirks and dealing with suppliers' evasions. "It all depends..." is a typical response, often followed by "every customer is unique". Or they'll stonewall you with the traditional phrase, "on application".
The all-time classic was the software salesman who joked, "If I told you that, I'd have to kill you."
The recent arrival of the Sage Instant Taxation application presented a new twist to this ancient ritual. Press releases and Sage executives presented the product as a "£99" application for small accountancy firms. Good idea - for years small fry like Drummohr, FastTax, TaxCalc and QMS have been nibbling away at Sage's share of the tax and practice software market. Look at any recent Any Answers thread on tax software and you'll see what I mean.
Sage Instant Taxation looked good - pretty much like Sage Personal Tax, but with a much more attractive price tag. Or so I thought. When Sage executives first presented it to me, they said it would handle up to 200 clients. That fitted Becky's requirements perfectly in a recent Any Answers query.
But on checking the product's details in the Sage Shop, I discovered that the commercially available product was set up to cater for a maximum of 100 clients - not enough for Becky. On closer inspection, I found that the price for the 100-client edition of Sage Instant Taxation was £324, somewhat more than the budget rate I had been led to expect by the Sage publicity.
Sage can (and does) configure its products and charge for them how it likes. But bait and switch routines like this make me question what other little pricing tricks a supplier might try. At this point, expect the doors to burst open with a gang of software as a service suppliers (SaaS) crying, "That's exactly the kind of subterfuge that our transparent subscription price model will do away with. Software is dead!"
But hold it right there. Dennis Howlett has been attempting to document accounting SaaS price structures to compare against the return on investment from on-premise software and guess what? With the variety of pricing models and variations based on number of users, core features and optional extras, "Getting hard facts isn't easy," he reports.
If journalists have to fight to get a simple quote for pricing, I always wonder what it must feel like to be treated that way as a potential customer. This month sees the launch of our Software Satisfaction Awards 2009. Perhaps if we had room among the 24 categories for a software sales satisfaction prize, it would cure the industry of one of its most grating habits.
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Agree - hard work ....
Quite right - there is a lack of transparency in pricing, although, with the SaaS market it is becomming more defined with the advent of on-line menu pricing matrices.
Part of the historic reason probably surrounds VAR's (value added..) who by their very nature seem to be a cagey bunch and will not volunteer anything until you have provided chapter & verse about yourself - after all they percieve their fees to be at stake
With SaaS, in theory life is easier, because these are generally vanilla products in modular format and the 'all depends..' phrase has largely become redundant. Unfortunately, as you so rightly say, replaced with nasty little wrinkles such as a maximum of 2,000 entries or leaveraging on concurrent users.
Everything is generally disclosed just a nightmare to correlate for any meaningful comparison
I think that time will iron out the SaaS nasties and forsee that in the future 'entry level' accounting systems (i.e. Cash Book style - General Ledger, Bank, Nominal) will become free at the point of entry as an introduction to more complex systems. This could well evolve into a scaleable three tier model
With additional modules (i.e. eCommerce (web services), HR, EPos, Fixed Assets etc...) all having defined add-on prices
Of course the aspect that has been vastly under-rated with this whole SaaS issue are web service interfaces from eCommerce sites into the main accounting systems.
The web service approach allows anyone to develop eCommerce systems (in any language, hosted anyware) and still have seamless access to products in the clients main Db and the ability to save sales transactions back to that Db
Web sites such as these can be implemented in a few days and are such powerful systems that frankly they should be a 'no brainer'
Frustrating
I know where you're coming from.
It used to be that when someone asked "how much is KashFlow?" we'd have to take a deep breath before rolling out the options available.
We took the decision to simplify it last year - we got rid of annual options, second year discounts, etc. it's just £15.99 per month. Simple as that.
Then again - it could cost £4 a month if you're an accountant on our Partner Programme. And then there are the two options for the PayPal Importer... arrrrgh!
TaxCalc
Just looking at a demo of TaxCalc. The Pro Suite version includes unlimited personal tax (SA100) unlimited partnership tax (SA800) unlimited corporation tax (CT600) online filing, free in year updates, even able to submit amended returns online. All this for £375 + vat. There are many cheaper TaxCalc options but for me the Pro Suite is an unbelievable deal. The program looks good, works great and friendly staff at the other end of the phone. Forget Sage, they don't have a care in the world for customer satisfaction.
smc
Understood
Thanks for the ping John. While I'm not going to disagree in principle, in my own re-interpretation of this post I say:
"The difficulty - which I think John has slightly misunderstood in referencing my thoughts - is that the evolution of business models makes a straight price comparison between saas providers somewhat awkward. Even then, I believe you have to parse pure price in a different way, evaluating a raft of other factors into the equation. That forces you into considering a value based model which I believe is more useful than simply looking at the commodity elements."
Penny's worth from South Africa
Not that I HAVE a penny, we use cents but you know what I mean.
I wish to tentatively defend the software industry pricing!
I do not know your accounting packages but our Company's software is Web-based and amongst other wonderful things we store unlimited documentation offsite. In South Africa bandwidth is expensive and so is the rental of Servers. So WE HAVE VARIABLE COSTS dependant upon the size of your business. It would be unfair to charge everybody the same. Now we try to make it easy but still....the answer in our case too is...it depends!!
Provided the guys dont play tricks and give you a price within minutes I don't really know why this should upset you. Are you not over-reacting??
Smooth as a baby's bottom...
@jc - you say that a limit of 2,000 entries is a "nasty wrinkle". Not true. It's a transparent pricing model that provides an entry point (£13.50 per month) for small businesses to an accounting system that they can continue to use as they grow. As far as I am aware, there is no other accounting software provider that allows a customer to do this. If it was hidden or, even worse, revealed after the customer had committed, that would be nasty.
The £13.50 subscription includes general ledger, accounts payable, accounts receivable and electronic invoicing. The feedback we’ve had from our smaller users is that 2,000 entries is enough for their needs and they love having such depth of functionality at their finger tips. If they stay small, they continue paying the small subscription. If they grow, then there is a seamless transition to the full price (£27 per month) which is still incredibly low cost against comparable solutions. There is absolutely no 'limit' as you state, everything in e-conomic is completely unlimited. The competitiveness of our pricing was demonstrated by the figures published a few days ago by Dennis Howlett.
There is full transparency on our pricing here. We also give free access to accountants via their own Administrator module, with co-branding and direct log in from their own web site. It's used by over 3,000 accountants and bookkeepers.
Mark Davies
e-conomic - Freedom from Evil
Transparent pricing
Many thanks to Mr Connolly for those kind comments.
We believe that the TaxCalc range of products not only represents excellent value for money, but our clear pricing strategy enables prospective customers to make an informed, considered choice at the outset.
It’s worked for us commercially and it’s possibly one of the reasons that TaxCalc won the 2008 Software Satisfaction Award – no offence that you forgot to mention that John!
Mark's right
@jc - I support @mark's comments regarding pricing. It is only fair the customers pay for what they use - isn't it? We're happy with that on our phone, electricity and gas bills - why not software? Especially when the provider has supplied all the infrastructure FOC.
BTW - try finding a price on Microsoft sites that you can even start to comprehend.
questions & answers .....
@Julius - why are you locked into za hosting. Granted local ISPs are expensive, what is to stop you hosting apps/db anywhere in the world?
@dennis - The point is that users are not paying for what they use only an arbitrary storage element. True usage is a combination of storage & processing which is reflected in Cloud pricing
Utilities generally only have one level of service & no storage aspect; so usage payments work well. With multiple components & functionality the usage model struggles to cover all aspects
For simplicity, I suggested earlier a 3 tier banding which would logically lead to pricing per band as functionality increases. However, taking the usage model either means an additional usage cost on top of a functionality cost or giving increased functionality away and potentially wrapping the 'lost' cost within an increased usage charge. Surely this would be unfair for those who only wanted the basic level and go to making the pricing structure completely impenetrable
How does the supplier handle modular costing (increased functionality) or is it ignored
@mark - I assumed you were scaleable but could not understand the logic of a 2k banding because it doesn't really make sense unless one carries on banding right through the scale (i.e. 2k-4k, 4k-8k etc) - otherwise how do you handle 10-20k entries without suffering a hit? On looking at your site, you seem to have taken a hybrid approach of entry level usage but modular pricing thereafter - however you do seem to implement an additional user charge
For the future we are going to see prices forced down - all things being equal I would expect to see the following pricing
and all prices would be inclusive for 5 concurrent users which should cater for a large section of the target market
Danger of over complication
There are two elements being discussed here - price levels and price models. John's article was about transparency, which is mainly about price models. Vendors who provide pricing increments based on a combination of usage and functionality need to be very careful in order to avoid committing the sins that led to John's article. My view is that breaking the core accounting system down into levels 1,2,3 etc. simply confuses things. We believe in...
- Having one standard price, but half-price for small businesses who naturally use the software less - as shown on our pricing page.
- Including *all* of the accounting functionality a standard business needs in the base version, for all customers irrespective of price. This way, customers don't need to worry about upgrading or paying more in order to use sales invoicing, sales and purchase ledgers, reporting, multi-currency. In practice, we find that most customers like to use all of the core modules, but those that don't simply use the ones they need.
- Placing no limits on how much each customer can use the system.
- Making the transition between pricing levels easy, seamless and understandable.
- Providing optional add-on modules that surround and integrate with the core accounting system, and which can be switched on by the customer at the click of a button.
The only discussion that remains is what to use as the basis for transitioning between pricing levels. We use the number of accounting entries because it is accepted by 99% of customers as a reasonable, clear and simple mechanism. I wouldn't be surprised to see other vendors following the same or similar principles.
Mark Davies
e-conomic - Freedom from Evil
No charge for webservice!
@jc - in your pricing tier you suggest a charge for Web Service access for ecommerce integration.
We made that mistake and I think it's set us back years. The API/WebService should be free to anyone with an account. You'll then foster much more 3rd party development.
various ..
@mark - whilst we are all sympathetic to fixing Google rankings by boosting the number of cross links, having an excessive number in a posting could be percieved as rather playing the system!
@duane - thank you for the tip about web-services ; makes a lot of sense
On a wider note, is there any merit on having a SaaS developers organisation - or does one already exist?
Yes and no
@jc - there is no formal cloud grouping as such BUT - there are regular Cloud BarCamps in the UK where the likes of Sun, Microsoft and Amazon all pitch up. There's a lot of interesting work going on in some surprisingly large organizations but there are plenty of challenges - much coming from the Microsoft dev houses.
Accounting group starting to formalise
@jc - In my defence, at the forefront of my thoughts was the need to provide readers with examples of what I was suggesting is good pricing strategy in online accounting - in other words, putting my money where my mouth was.
Regarding the idea of an industry group, the possibility of a group for SaaS accounting providers is already under discussion. Would this be of relevance to you? (A bit like saying "Who are you?", but I don't mean to be blunt.) Feel free to contact me. [mda AT e-conomic DOT co DOT uk]
Mark
e-conomic contact details
Shark infested waters
I agree, the software companies make it as hard as possible to have a successful IT project. In almost every one I've been involved in, there's been some unforeseen aspect that has resulted in extra costs where transparent charging would have made things clear up front.
There's more on this at http://www.ciceroguides.com/Implementing_an_IT%20System.php?doc_id=11