April 10, 2001, 11:23 AM — WITH THE RELEASE of the latest version of its CRM (customer relationship management) software, PeopleSoft has changed the way it sells the product to a value-based licensing plan.
The company made a move this week away from using seats and servers to determine how much a company pays for its PeopleSoft CRM suite. Instead, license terms are now based on a number of business metrics and according to the customer's size.
"In today's world it's difficult to employ a per-seat license when there are open solutions on the Internet," said Robb Eklund, CRM marketing vice president at PeopleSoft, in Pleasanton, Calif. "Our approach has been one where we want to assess the license based on the utility customers derive from the applications."
Although the move is a first among heavyweight CRM vendors, value-based licensing is not new to PeopleSoft. Before entering the CRM fray with its acquisition of Vantive in October 1999, the company had sold its other software applications using the same scheme and is now bringing PeopleSoft CRM in line.
PeopleSoft is assuming that "the size of the company is a better determination of the value of your Internet relationships than just how many CPUs it happens to run on," said Erin Kinikin, an analyst at Giga Information Group in Santa Clara, Calif. "It seems that this pricing appeals to customers who are ready to make an enterprise-level investment."
Marketing automation vendors have used the value-based licensing, whereas CRM vendors have typically relied on models that have depended on the number of employees and an approximate number of Internet users -- often a very difficult number to determine.
"Essentially, it's another way of getting at a site license and not worrying about which machines the company is installing the software on, [which means] less administration," said Sheryl Kingstone, program manager for CRM management strategies at The Yankee Group in Boston. "The problem with site licensing is that it's usually out of range for most companies due to its high cost."
Eklund said the licensing scheme would rely on auditable factorsto arrive at final pricing. Contingencies would also be built in to evaluate the license if the customer grows.