Did you know it’s cheaper for venue software providers to maintain cloud-based software, as opposed to locally-hosted software? This means a switch to their cloud-based platform will cost them less, and therefore shouldn’t cost you exorbitantly more. If it does, it could be a sign they’re using a business strategy known as “price skimming”—a sly tactic for well-established tech companies. President of EventBooking, Steve Mackenzie, explains more below:
If you’re involved in selecting new software for your venue, you’ve probably heard more discussion about “the cloud” in the last few years. But this is not a new concept for technology. It simply means your software is stored, accessed, and secured via the internet—with no local infrastructure required.
Despite how prolific cloud technology has become in other industries, there are still quite a number of venues that have older software housed on their own network, with all the infrastructure supported and provided by their in-house IT Department.
One of the biggest incentives to use cloud-based venue management software should be its lower cost. For software providers, it’s far more cost effective to develop, deploy, and maintain a single version of software—as opposed to keeping up with dozens of different software versions, deployed across multiple in-house installations. With this in mind, it is not unreasonable to expect that a cloud version of your current software be less expensive than an in-house version. Take Microsoft, for example—when Microsoft moved their Office application suite to the cloud, it became substantially less expensive to buy an annual subscription than purchase the locally-installed version.
As with everything in the technology world, over time most products become cheaper. Can you imagine paying $11,854 for a 15-inch television? That’s the equivalent today of what the wealthy forked over for the first color TV—priced at $1,295 in 1954.
There are a number of reasons to explain why new technology may be very expensive at first and then sharply decline in price, but one of the more insidious reasons is a practice called price skimming—or setting high prices initially to take advantage of customers with inelastic demand, and are willing to pay the high price (not unlike price gouging). Then when these consumers have bought the good, the company may reduce the price over time to attract a wider group of consumers who are more price sensitive, with elastic demand.
If the newer, cloud-based version of your venue management software is the same or very similar to the hosted version you currently use, there is no good reason for an exorbitant price increase. Remember what year it is—in 2020 “the cloud” is no longer considered new and groundbreaking technology. Therefore the provider’s reduced costs of production and maintenance should actually ensure cost savings for your facility.
Now, if the cloud-based offering includes much more functionality than your current one—say a 75% difference and improvement—a price increase is more understandable, but even then it should still be relative to other industry options. I’ve been amazed to hear from venues that the price quote to move to the cloud-version of their current platform is 2-3 times what they have previously been paying—a scenario that has all the tell-tale signs of price gouging / skimming. Businesses are brazen enough to use this strategy when they think they have a large enough segment of the market in their grip, and underestimate the other viable options their customer base may consider.
There was a time when the options for quality venue management software were somewhat limited. But that’s not the case anymore, and that’s not how price-setting should work regardless. Sure, everyone is entitled to make a profit—but that’s precisely how pricing should be structured: working back from the cost of the provider, then adding a profit component. Not a “let’s do what we think the market will bear” approach.
So if you find yourself looking to move your software to the cloud and the price seems suspiciously high, rather than begrudgingly paying the asking price—do your due diligence and see what other cloud-based platforms have to offer. Hopefully you’ll find another option that’s not only better overall and saves your organization money, but also one provided by a vendor who values fair pricing and considerate business practices.
Steve Mackenzie is President at EventBooking, an innovative, cloud-based venue management solution that has over 1,000 clients around the globe. Based on regular polling of their client-base, EventBooking retains a 99% customer satisfaction level.