Licensing Model on Acquisition/Merge of Competing Products

[deneme]

Hi all,

One company purchasing a competitor should not require one of the competing products being killed over time, as this hurts the existing clients and the experts of the product that is being killed over time. I think this is possible with the following licensing model without compromising the licensing revenue of the software vendor.

Assume that company A has product x for planning and budgeting, and it acquired its competitor company B that has product y for planning and budgeting. Both products x and y have their own superiorities to the other one and both has their strong customer base and both has their own specialist implementers in the market. Both products originally sold as server/admin license and named user licences.

My proposition is the following: post to the acquisition of company B by company A, the only remaining company is company A that sells both product x and product y. Its sales model should be in a way that company A sells product x and product y together as a package of planning and budgeting software. When a client company buys an admin license and 100 named user licences from the vendor company A, both of the software x and y are shipped to the client and the client has the option of either of product x or y or both together. This means either or both of these products x and y can be deployed upto 100 named users and one named admin/server user can install/administer one instance of either or both product x and product y. The price of the package will not be more expensive than the price of purchasing one product alone.

This model will have the following benefits:
- Product x and product y will not compete with each other that means the clients will not have to decide which product to purchase and sales people will not need to promote one product over the other one. Rather than explaining the differences of both products, sales people will spend their time on explaining the greate features of both products.

- The packaged licence will be more powerful than the individual ones and than the other competing products in the market.

- When a client buys the package, depending on the specific needs of the individual planning/budgeting application requirements, the implementation consultant will be free to choose the one that is most suitable to the requirements for each and every application. For example, product y might be best for sales forecasting while product x might be best in cash flow planning.

- Since most planning/budgeting applications can be built with either of product x or product y, the availability of skilled developer resources will be less restrictive for the implementation projects, as the developer of product x can replace the developer of product y since the client company has the option of using either of both products.

- While empowering the position of Company A in the market, mathematically this licensing model will not reduce the licensing revenue of company A as it will sell the package to the potential audiences of both product x and product y generating at least the same revenue.

- This model does not need to stop Research & Development activities in company A to create a new planning/budgeting product that will be a combined version of product x and product y having superior features of each product.

Certainly much more benefits can be listed here in such a licensing model.

I would like to get your opinion regarding this licensing model in general. More specifically it can be a fruitful discussion to analyze if this model can be applicable in the case of Applix TM1 acquisition by Cognos, as there has been a lot of wonder and debate regarding the positioning of TM1 among other Cognos products.

Best regards,

[mrobby]

It sounds good in theory but.......

It's just not logical for a company to purchase something, bundle it with existing products, and then not receive additional revenue.  The exception here is that a company has made such a purchase in order to keep up with its competitors technologies that may already include the technology you are purchasing.  IBM did not purchase Cognos in order to give the licenses away with an existing product purchase.  Same as Cognos purchasing TM1 I would believe.

There also may be innefficiencies with developing two types of software that could logically be combined in order to create one package with the best of both software's functionalities.  Research and Development is an expensive cost for software companies and it cannot be capitalized which puts a drain on their income statement.

I would believe that the Roadmap will be to take the engine from TM1, which is more up to date the Cognos Planning and merge it with the functionality of Cognos Planning.  The intellectual capital that TM1 has solves quite a few problems that Cognos Planning could not overcome, namely data sparsity.  I don't have a good knowledge of TM1 but based on what Ive seen and heard this would seem like the best idea from a profitability standpoint and software development standpoint.