I have always considered myself a thrifty person, though my wife, daughters and friends tell me that I'm just plain cheap. In my interactions with corporations I tell buyers to spend an appropriate (rather than foolhardy or miserly) amount of money on technology. However, a recent piece of analysis out of AMR Research implies that many buyers have become so thrifty (and perhaps) jaded, that they can't see the forest from the trees.

AMR's Laura Preslan, one of my favorite analysts, recently wrote a piece entitled "Price Management Benefits are Worth the Investment" on the price points and buying desires of those looking for Price Management software. It's one of those technologies that is about to break out of the box and can generate loads of revenue uplift and margin improvements for buyers.

Yet according to Laura, many buyers are looking at this technology like it was a bargain basement PC or an accounting package: they don't want to pay. Many buyers (for understandable reasons) have gone from irrational exuberance to irrational penny-pinching.

This approach is far from fair or rational. For instance, a large manufacturing company with tens of thousands of employees will spend many millions of dollars to install Microsoft Office, which is being used less and less by people, given all the alternative technologies professionals use (e.g. blogs, instant messaging, BlackBerry, web-based portals, etc.) Yet when approached to spend less money on a technology that can increase margins by 1 percent or more, the same company demurs. Perhaps that is one of the reasons that Oracle just bought ProfitLogic, which sells pricing software for retailers .

(By the way when a sizeable company increases margins by a percent or more, that increase will often translate into market capitalization increases of hundreds of millions of dollars. Is that something the CEO or board of directors would be interested in?)

The problem that pricing software vendors have today is indicative of a broader problem in the enterprise software space. As I see it is that there is no differentiation between the value and cost of enterprise software. All sellers basically say that you will get a payback in 6 months or less. Yet they, nor many (if any) of the market research firms actually stack rank the value of respective enterprise applications.

How much more valuable is a marketing solution than PLM? Where does supply chain optimization fit? How about ERP and human resources? Unfortunately, it's hard to tell as all product literature follows the same pattern: 1) We have great technology, 2) We can save you money; 3) We have customers who like us. It almost doesn't mater who the seller is or market; just change the names and products and it is pretty much the same. Try it with your marketing literature to see how well (or badly) you pass this acid test.

By the way, any type of neutral stack ranking is not something that most sellers would like to see as only five categories (or markets) would make the top five (for a given vertical market) as dozens of others would not. With IT budget increases low, if your category or market is not in the top five (or even top three), you are dead.

Thus it's not surprising that sellers continue to be beaten up on price as they haven't displayed discernable value or reason for differentiated pricing. Until they do, buyers will continue to have procurement professionals body slam IT sales reps and CEOs to obtain massive discounts regardless of technology type. It's time someone should figure out the true value of enterprise software before the market drives everyone into the ground. Who's up for it?

Erik Keller is principal of Wapiti. He provides strategic consulting services for companies seeking advice on enterprise-software business models and technologies. In the spring of 2004 his book, Technology Paradise Lost, which predicts the future of IT spending in corporations was published. He is currently a Research Fellow at Saugatuck Technology. Find out more at www.wapitillc.com.