CA Inc. is recasting the pricing structure for its server backup software to reduce the number of products a single...
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customer can choose among from a mind-numbing 60,000 to a more manageable four.
CA will announce today a simplified pricing model for its server backup software suites -- ARCserve Backup and the XOsoft products -- which allows partners to sidestep the time-consuming a la carte package-and-pricing approach that is the norm among major competitors in the backup and recovery market.
"The way they used to sell the product was to sell a base server license and then, depending on the kinds of devices in your environment, you would buy the correct modules," said Lauren Whitehouse, data protection analyst for Enterprise Strategy Group in Milford, Mass.
"If you had an email server, you might buy the server module and an agent for every instance of Exchange you had running and the open-file [backup] capability for your mail servers, and you might want to back it up to a tape library; and you'd have to sit down to figure out which of those you'd want to do," Whitehouse said. Whitehouse was one of the lead marketers for ARCserve at Cheyenne Software Inc. before CA bought that company and then continued at CA for two years.
The process was complex enough that new orders had to be validated by a technical specialist at CA before the solutions partner could complete them, according to Frank Jablonski, director of product marketing for CA's midmarket and storage business unit.
Between the customers' efforts to save money and CA's often rushed attempt to validate order configurations, important elements were sometimes left out, Jablonski said. The result, he said, is that customers later became angry, when, for instance, the lack of backup for open files or other functions became obvious.
Under the new plan, server backup software customers just pick the right package for one of four functions the server will be performing. The four packages are File Server, eMail Server (which includes support for both Exchange and Notes), Database Server (including SQL, Oracle and Ingres support) and Application Protection (which covers all the functions in File Server, plus SharePoint).
Each of the packages is subject to a flat cost for software and licensing. The File Server package is $795 per server; the others are $1,495 each. A wizard walks the customer through the order configuration process, and all the correct tools and licenses are activated automatically.
"It was a lot of work before," said Marc Malafronte, manager of SMB sales at Software House International, a $2 billion software and services provider in Somerset, N.J., which has been beta-testing the packages. "What it does is change the conversation you're having about backup. Before, customers would buy just what they need because they were trying to get the best price.
"Maybe they were neglecting their open files, or not backing up all their databases. [With the new pricing model,] they don't have to," Malafronte said. "You can have a conversation about all their needs. And it helps us sell them other things, like other options or hardware, because they're considering all their options."
The package prices are "a little higher" than under the old price structure, Jablonski said.
Malafronte said his customers don't mind, though; the packages are easier to understand, and customers can see the value of having all the tools and licenses included in one price. That makes it easier for them to change their configurations without additional purchases or renegotiating a contract.
"We don't market it this way, because it would be kind of silly," Jablonski said. "But there's $50,000 worth of software in that package, roughly. A customer would say, 'I would never buy all that software!' But it does give them great value for that server."
It also gives them flexibility, Malafronte said. If a customer wants to switch from an Oracle database to SQL or from direct-attached storage to a storage area network (SAN), the licensing in ARCserve won't stand in their way.
And, customers or partners who prefer to order the traditional way are free to do so, Jablonski said.
Understanding and selecting among too many SKUs isn't the only problem with a la carte sales of complex products, according to Mike Karp, senior analyst at Enterprise Management Associates in Westford, Mass.
"The problem with all those SKUs is that pretty soon a large IT organization will spend more time on contract management than on IT," he said. "Any kind of complex organization could have contracts from dozens or hundreds of vendors and have up to 60 contracts with each of those."
Pricing the packages higher than customers would be able to get the pieces individually does tend to front-load the spending on that contract.
"But, in the long run, if it does cut down on contract management and related issues, it does turn out to be cheaper," Karp said. "That's exactly why there's a huge opening for companies like CA, if they can streamline the delivery of the product and the mechanisms of delivery."
Hewlett-Packard Co. -- long the poster child for incomprehensibly complex pricing sheets -- has been working for a year to simplify its approach, Karp said.
And Symantec Corp. launched a price-simplification campaign in June, although not one as extensive as CA's, Whitehouse said. "This is CA trying to do the same thing," she said.
But the other major backup vendors -- EMC Corp., IBM and CommVault -- have not yet followed suit.
"I just don't see much from those other guys," Karp said.