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The evolution of software pricing: from box licenses to application service provider models

Nick Bontis (Nick Bontis is Assistant Professor at DeGroote School of Business, McMaster University, Ontario, Canada.)
Honsan Chung (Honsan Chung is Research Associate at DeGroote School of Business, McMaster University, Ontario, Canada.)

Internet Research

ISSN: 1066-2243

Article publication date: 1 August 2000

Abstract

Software is the intellectual capital output of the codified knowledge of a programming team. The development cost is high, but the variable cost of sale is substantially lower (negligible) than for hard goods. Unfortunately, there does not exist a valid or reliable measure to value software. The trend has been to align pricing to the activities that buyers realize value from. However, new architectures change the nature of where value is realized and how service becomes part of the equation. There does not exist a perfect generic pricing model. Vendors must understand the value they provide to their customers and create a price structure that aligns pricing with value realization, but more importantly facilitates their business objectives of the product (and service).

Keywords

Citation

Bontis, N. and Chung, H. (2000), "The evolution of software pricing: from box licenses to application service provider models", Internet Research, Vol. 10 No. 3, pp. 246-255. https://doi.org/10.1108/10662240010331993

Publisher

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MCB UP Ltd

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