Software has become the backbone of modern door companies, facilitating operations, streamlining service, and boosting productivity. However, the pricing models used by many software providers can significantly impact a door company’s bottom line. The pricing model that often goes unnoticed until it’s too late is user-based, or “parasitic” software pricing. While it may seem like a straightforward approach, this model can damage companies in several ways, ultimately affecting profitability and competitiveness. Before signing a contract with a company that prices their system using this parasitic model it is important to anticipate the hidden costs that will impact your business over time.
- Cost Inefficiency
User-based monthly pricing structures charge a fee for each individual user or seat monthly, regardless of whether each user utilizes all the software’s features or not. This approach is often at odds with the actual usage patterns within a door company. In most organizations, not every user requires full access to all software functionalities. This inefficiency results in door companies paying thousands every month for unused or underutilized licenses, which adds up quickly and becomes a drain on finances.
- Limited Scalability
As door companies grow, and the industry evolves, software needs expand. User-based monthly pricing models can pose a significant scalability challenge. With each new employee, a door company must subscribe to additional licenses, making it difficult to predict and manage software costs as the organization evolves. This lack of flexibility can hinder growth opportunities, particularly for fast-growing door companies, or companies with seasonal demand changes.
- Reduced Adoption Rates
High user-based licensing costs can limit door companies from encouraging widespread adoption of a software platform. When every new user incurs an additional cost, decision-makers may limit access to only essential personnel, hindering collaboration and efficiency. This results in missed opportunities for door companies to fully harness the potential of the software to drive innovation and growth.
- Budget Uncertainty
User-based software pricing makes it difficult to budget accurately. Door companies often face unexpected costs when onboarding new employees or upgrading software. These financial surprises can disrupt financial planning and lead to budget overruns. Requesting additional user licenses can frequently disrupt or change the terms of the existing contract. Many unscrupulous software companies will use the opportunity to add additional “on-boarding” fees or other meaningless charges and requirements.
- Incentivizing Shadow IT
In response to the high costs and complexities associated with user-based pricing models, door companies may resort to using unauthorized or unapproved software strategies like shared user accounts, known as shadow IT. This practice can pose security risks, create data silos, and violate data privacy laws, making it challenging for door companies to maintain control and compliance. Shared users and passwords also make internal tracking of job performance and system activity impossible.
- Competitive Disadvantage
Door companies operating under user-based pricing models will often find themselves at a competitive disadvantage compared to rivals unencumbered by such limitations. Competitors will be able to scale their operations more efficiently, allocate resources more strategically, and offer products or services at lower prices, thereby capturing greater market share.
Conclusion
While user-based software pricing models may appear straightforward, it can often have detrimental effects on a door company’s financial health, scalability, and overall competitiveness. To mitigate these challenges, businesses should consider more modern pricing models that align more closely with their actual software usage patterns and growth objectives. Usage-based pricing, or tiered pricing can offer greater flexibility and cost control, allowing door companies to make the most of their software investments while remaining agile in a rapidly changing business landscape. Usage and tiered pricing models are carefully configured so that door companies can grow (significantly) before needing to budget an increase in investment. Ultimately, the choice of pricing model should be a strategic decision that empowers rather than hinders a door company’s ability to thrive and succeed, and the software publisher should be a partner rather than a parasite.