Team System Pricing: Buying a Steak at McDonald's
One of the hurdles Microsoft faces with Team System is that it's expensive relative to the other software Microsoft sells. Marc Wolfson, a Developer Evangelist at Microsoft, met with us recently at Vertigo and I thought he had a great way of explaining the pricing conundrum:
[Team System] is like walking into McDonald's and seeing prime rib on the menu for $20.
It could be the best prime rib you've ever had, but this isn't the kind of product or pricing you expect from McDonald's. That's exactly the challenge Microsoft faces with its customers-- why are you selling prime rib instead of burgers? And why is it twenty freakin' bucks?
At $10k per seat for the whole enchilada, and $5k per seat for the three task-specific editions, Team System definitely isn't cheap.
But consider how much Team System's competition costs. One comparable product is IBM's Rational Professional Bundle:
So you're looking at either $4k, $7k, or $12.5k per seat! That puts Team System pricing in a whole new light.
But a lot of hamburger fans still think that they should get steak for the same price. Erik Sink debunks this myth:
A lot of Visual Studio developers in the "Professional" tier are complaining that they want the stuff in the "Team" tier. In other words, they may understand that they are not the target market for Team System, but they are not happy about it. They want source control. They want bug-tracking. They want unit testing. Placing those features in the "Team" tier does not meet their expectations. So they complain.
Microsoft is the largest software company in the world. They are utterly dominant in some markets, but they are utterly irrelevant in others, including the market for enterprise-class lifecycle development tools. It is important to realize that Microsoft is facing very difficult competition in this market. They have some major catching up to do. Success is not guaranteed.
If I were to advise Microsoft on how to fail in this challenge, I would tell them to try and please the enterprise customer and the folks in the "Professional" tier at the same time. :-)
But Microsoft is smart. They are designing a product to win and they are pricing it accordingly. That is IMNSHO the right strategy for them. Team System is already a lot cheaper than its competition. If they priced it dramatically lower than it is now, the target market would not take it seriously. Remember, the people in that target market already hold a negative view of Microsoft's ability to deliver this kind of product.
I believe Microsoft will succeed. Team System is going to be an incredible product. It raises the bar in a number of ways that I believe are truly unique. It will take some time before it attains the level of polish and maturity now available with ClearCase, BitKeeper or Perforce. But they will get there.
Perhaps someday Microsoft will bring some or all of the features in the "Team" tier to the broader market. But right now I completely understand why they feel the need to stay focused.
Eric is a little biased since his company sells source control and bug tracking products that are perfect for those disenfranchised Visual Studio 2005 Professional developers. Even after factoring for bias, I think what he says has a lot of merit. Microsoft will eventually expand Team System downward to address these concerns, but right now Microsoft is focusing on the enterprise.
And can you blame them? If you priced your best steak at $3.99, exactly what kind of steak would you be expecting?