Gartner Research

Protect Against Budget-Busting, Revenue-Based Software Pricing Metrics With These Three 'Must Do' Steps

Published: 01 February 2018

ID: G00351078

Analyst(s): Lori Samolsky , Bill Ryan

Summary

Sourcing and vendor management leaders negotiating software and cloud contracts via an unclear, revenue-based pricing metric face substantial risk and (unbudgeted) costs. Incorporating four key contractual terms will protect and mitigate future exposure to revenue metric risks and surprises.

Table Of Contents
  • Key Challenges

Introduction

  • What Are Revenue-Based Software and Cloud Pricing Metrics, and What Is Driving Their Popularity?
  • For Most, the Risks of Revenue-Based Pricing Metrics Outweigh the Benefits

Analysis

  • Publicize the Risks and Complexities of Revenue-Based Pricing by Communicating to Stakeholders the Key Questions to Ask Vendors
    • Scenario 1: You Acquired a New Client for Your Vendor
  • Prepare Your Organization for the Known Risks of Revenue-Based Pricing Metrics Through a Rigorous Evaluation of Existing Contracts
    • Scenario 2: The Definitional Disaster
  • Negotiate Four Key Contractual Terms to Protect Against the Downsides of Revenue-Based Pricing Metrics
    • Scenario 3: Getting to the Next Level Demolished the Value Proposition

Gartner Recommended Reading

©2019 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see Guiding Principles on Independence and Objectivity.

Already have a Gartner Account?

Purchase this Document

To purchase this document, you will need to register or sign in above

Become a client