How do we set pricing for on-premise deployments or private cloud versions if an enterprise client requests it, as opposed to our standard cloud offering? Do we charge a big setup fee, higher subscription, or a different licensing model altogether?

Based on the principles outlined in our pricing strategy book, Price to Scale, the answer is that on-premise or private cloud deployments often require a mix of pricing elements tailored to the added complexity and value delivered. Here are some key considerations:

• Upfront Setup Fee: On-premise and private cloud solutions often involve additional integration, customization, and installation efforts. Charging a meaningful one-time setup fee helps cover these one-off costs and the associated implementation risks.

• Higher Ongoing Subscription: Since the support, maintenance, and operational overhead for on-premise solutions are usually higher than those for standard cloud offerings, it’s common to adjust the recurring subscription fee. This reflects the added value and cost to both your operations and the client’s more complex environment.

• Different Licensing Models: In some cases, a modular or custom enterprise licensing model might be appropriate. This can include a combination of capabilities (such as specialized security, advanced analytics, etc.) priced additively, rather than bundling everything into a single standard rate. Such a modular approach ensures you can tailor the pricing to the specific environment and needs of an enterprise client.

The book suggests that pricing should directly mirror the ways customers consume and derive value from your product. When a customer chooses a non-standard deployment (like on-premise or private cloud), you need to adjust the pricing structure—not just by scaling fees upward but by considering a hybrid model that addresses both the immediate setup costs and the ongoing operational expense.

In summary, while there isn’t a one-size-fits-all answer, our pricing strategy for these alternative deployment models typically involves a combination of an upfront fee to cover implementation and a higher recurring fee (or a modular licensing approach) to align with the added costs and value of a customized deployment. This balanced approach ensures you capture both the immediate and long-term value delivered to the enterprise client.