Analyst Perspectives

Doing one’s homework is vital in buying business software. However, unless you’re replacing a relatively simple application, it’s hard to know exactly what to evaluate. Indeed, if people in a company given this task don’t have experience in using a specific type of business application or don’t understand how new or improved functionality will help execute business processes better, they may do a poor job of assessing the available alternatives. Third-party consultants may be helpful, but their prejudices and familiarity with a vendor’s products may cloud their objectivity. In the end, a buyer might agree with their point of view, but this agreement should be an informed decision.

Smart organizations turn to the Web to do their initial investigation before talking to consultants or vendors. They can benefit from a wealth of free white papers, webinars, blogs and other sources that lay out specific points to consider, descriptions and evaluations of vendors, consultants’ viewpoints and other helpful facts and opinions.

There’s another source I found in my research into business software and the business issues that surround its use. Although patent office documents may look like bedtime reading for insomniacs, there are times when they are a surprisingly good source of information and insight. For example, here are three that I recommend for prospective buyers of price and revenue optimization (PRO) software:

• #7,680,686 System and methods for business to business price modeling using price change optimization, which is assigned to assigned to Vendavo  
• #8,010,404 Systems and Methods for Price and Promotion Response Analysis, which is assigned to DemandTec and relates to its “Price and Promotion Response Analysis” (PRA) software (analytics that are part of a price optimization system)
• # 7,949,553 Method and System for a Selection Optimization Process assigned to PROS Pricing.

Check out the description sections of the patents filed in this area because they provide a concise summary of what the software does and how it does it. Software patents do not necessarily indicate that a vendor has an absolute advantage or a better product than other software vendors. Moreover, as PRO software vendor PROS Pricing’s latest 10-K filing states in its risks section, “The patent position of technology-oriented companies, including ours, is generally uncertain and involves complex legal and factual considerations.”

Nevertheless, the patent descriptions and accompanying figures provide a good high-level summary of the basics of price optimization software and the process it’s designed to support. I don’t want to suggest that each document is comprehensive or that subject-matter experts would agree with every assertion. Still, some statements – such as “in B2B markets, reliable price control and management systems may be significantly more complex and more important than price optimization modules” – are on the mark and provide readers with useful perspective on the scope of the solution required and the business processes necessary to achieve the desired results.

In addition to the three vendors mentioned above, other suppliers of price optimization software include Model N, Navetti, Nomis Solutions, Oracle, Servigistics, Signal Demand, Vistaar Technologies and Zilliant.

For those who wish to dig deeper, I recommend Robert Phillips’ Pricing and Revenue Optimization, which provides an introduction to the theory and application of pricing and revenue optimization as well as its conceptual framework.

Price optimization is a potentially powerful tool for many companies in many industries, yet it is has not been widely adopted. One reason may be that it requires a concerted, strategic effort as I discussed in an earlier blog. Yet especially when it is linked with the appropriate sales incentives, I believe it can deliver a sustainable competitive advantage for companies in a variety of retail, industrial and financial services businesses. Senior executives – CEOs, CFOs, CIOs and heads of sales – should familiarize themselves with PRO, both the business discipline and the information technology that supports it. More powerful technology and the declining cost of business computing are making PRO solutions more available to a wider set of organizations. It could be a big help for your company.

Best regards,

Robert Kugel – SVP Research