The price management software business is dominated by a preponderance of smaller companies that are carving out mind- and market-share in the key disciplines of price optimization and contract management.
And on some level, they are all concentrating on similar issues such as managing price elasticity, revenue leakage, and policy enforcement. Even SAP America recently got into the act with its partnership with Vendavo Inc., while technology holding company, Symphony Technology Group, recently acquired another small player, Metreo Inc.
Amid the din, Model N (South San Francisco, CA), a revenue management specialist, is using its recent acquisition of another small player -- Azerity -- to tackle the complex pricing challenges of high-tech manufacturers. Its new Global Price Management suite, Version 7.4, is chock full of price management accoutrements that cater to chip, subassembly, and/or systems manufacturers, such as design registration for custom parts development and procurement, a Web-based interface for channel partner quoting, and debit processing. Model N's goal: help high-tech manufacturers to conduct more profitable transactions by reducing revenue leakage, eliminating overpayments to channel partners, and closing other business process gaps caused by more generic approaches to price management.
Price management has become critical as more and more high-tech product design, manufacturing, and distribution is outsourced to business partners worldwide. But price management needs to be approached collaboratively across multiple disciplines -- sales, marketing, production, and distribution -- both within and outside the organization, so "actualized revenue equals planned revenue," notes Steve Zocchi, Model N's vice president of marketing.
The problem is that many high-tech manufacturers, believe it or not, still manage product pricing via e-mail and faxes, as well as desktop spreadsheets and databases, that don't integrate with master product lists contained within enterprise resource planning (ERP) or stand-alone customer relationship management (CRM) systems. This doesn't fly in the increasingly complex and often volatile high-tech business that is increasingly being driven by volume purchase agreements on products with already dangerously thin profit margins. For instance, profits can turn to loss when customers who receive preferred pricing fail to meet purchase levels required to receive a volume discount, Zocchi points out.
Product line profitability can also be undercut by overpayment on distributor rebates and other promotional incentives, as well as murky visibility into pipeline opportunities, he suggests.
Key to the Version 7.4 is a rule-based engine that enables high-tech manufactures to automatically calibrate how they treat pricing and contract management (i.e., revenue splits with channel partners) as well as regulatory compliance reporting (e.g., Sarbanes Oxley) on a customer-by-customer basis. This enables all participants in the value chain to read off the same pricing page, Zocchi explains. The software also contains an integration server that enables unstructured and structured data to be appended to customer records held in ERP and CRM systems -- which keeps the enterprise system as the single version of truth, he adds.
Model N's software is priced according to company size. A one-year term license for a $500 million company, for example, runs between $200,000 and $300,000.