Run the Numbers The Evolution of Software Pricing (A History Lesson)
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Jul 26, 2025 Explore the fascinating evolution of software pricing from the 1950s to today. Discover how the journey from combined hardware and software to the rise of SaaS reshaped the industry. Uncover the impact of innovations like Amazon's elastic computing and the challenges of adopting hybrid pricing models. Learn valuable lessons on maintaining simplicity and transparency in pricing strategies, with real-world examples that build trust between vendors and customers. Plus, find tips for navigating modern pricing challenges in the age of AI.
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Six Waves of Software Pricing
- Software pricing evolved through six distinct waves with changing units of value.
- Each wave addressed vendor-customer relationship flaws from the previous model.
Usage Pricing's Double-Edged Sword
- Usage-based pricing aligns costs with actual use but can cause revenue unpredictability.
- It works well in growth periods but harms vendors during economic downturns.
Use Customer-Friendly Metrics
- Use pricing metrics that customers easily understand and relate to directly.
- Avoid complicated internal metrics that confuse and slow down sales.