We frequently get questions asking how our pricing model works, especially as compared to other vendors in the ETRM/CTRM industry. In answering the question "What will I Save?", we first need to understand the pricing model for legacy (or on-premise) software.
Typically, with on-premise (or even single-tenant cloud) software like an ETRM, pricing has three components:
- Perpetual License Fee
- Annual Maintenance
- Services (i.e., installation)
For a mid-size ETRM/CTRM customer, let's say the license fee is $1m on a 4-year contract. This is the most negotiable part of the contract because 1) it's not where the real money is paid and 2) the underlying variable cost (what it costs to send you the software) is essentially $0.
The annual maintenance fee, however, is where the margin gets real. Annual maintenance is often 20% of the standard pre-negotiation license fee. So, $200k/year in this example. This is less negotiable because this money pays for the development team. We've also heard of this as "the money that pays for new features and bug fixes," which makes our sales team go crazy.
Services – now here's where the major cost lies. On a greenfield ETRM/CTRM implementation, services can start at several hundred thousand dollars. However, implementations typically go into the millions, or even tens of millions (not because they're budgeted that way, but because they quietly end up ballooning in scope and time). The cost is unbounded – and from what we've seen, services is typically 75% of the total cost to the customer of an ETRM/CTRM installation. (CTRMCenter has an article on this, here). This is the case for numerous good and bad reasons. But, from our perspective, the most important reason is that because of a time-and-expense billing schedule, vendors are not incentivized to keep billing for services low.
Molecule is different. In general, users pay a single package price, plus applicable sales tax. That's it. The price includes implementation, "paying for new features," the license fee, etc.
We have a minor fee schedule for a handful of things like new users, custom reports, and re-configuration of the application – but most of our customers never pay any additional fees.
Package prices are calculated, on purpose, to be roughly equivalent to the 4-year amortized license fee + maintenance fees of another ETRM/CTRM. This takes into account that license fees are often heavily discounted for smaller customers – but the point is, we're not aiming for the lowest license fees in the industry.
What users just don't pay for with Molecule is implementation. We take on the risk of new implementations knowing that the payoff for our customers (and for us) is enormous. We are aggressive about bounding the total cost and time of the implementation – because we are incentivized to do so. We do things like:
- Assigning an expert project manager on Day 1
- Avoiding implementation-related travel, if at all possible
- Figuring out what "success" means for the customer, and keeping laser-focused on that goal
- Building tooling for our Customer Success (support & implementation) team, so that they can get their job done more quickly
This is how we create the most value. We believe that implementation costs, in Six Sigma terms, are waste (muda, mura, and/or muri). Our customers don't benefit from paying tons of money for implementation, and neither does our enterprise value.
Basically, our customers pay industry-standard software fees – but end up saving 75% of the total cost of an ETRM/CTRM because we don't charge for implementation.