Alternative Pricing for DSM Tracking Systems
Previously, I have discussed how to procure a DSM tracking system. As part of the procurement process, you will typically ask the vendor for specific method of pricing. Historically, time and materials-based pricing was the norm. While that may still be appropriate if you decide a custom-built system best fits your needs; it will be the most expensive option compared to the new subscription-based services. Additionally, you will be taking on more costs upgrade and maintenance costs with a custom system. As DSM tracking solutions have become more agile and configurable, these Software as a Service systems are usually structured as a monthly or annual payment on a per user basis. Subscription pricing such as this simplifies payments to the vendor and make budgeting for IT system costs more predictable.
There are variations of the subscription service pricing model. Instead of per user pricing, a consumption-based model is an interesting option and one that is becoming more common. This can be useful for companies whose workload varies over the course of the year. In this approach, the subscription can be structured to add users as needed or on a per transaction basis. In the case of DSM tracking systems, a transaction can mean several specific actions, i.e. a submitted customer application, a completed project, or an incentive payment made. Additionally, you may be able to negotiate pricing based upon the dollar value of the portfolio or program being managed. For instance, a flat fee ranging from one percent of the total DSM portfolio budget for mega portfolios to seven percent for small single program offerings, depending on the options that are offered and subscribed.
If you are not sure of how these different pricing models may work in your situation, there are a couple of options. “Try before you buy” is a way to conduct a test drive of the system on a limited basis. While this may result in an incremental increase in work to set up, the real-life experience in using the system is invaluable. Another option is to test a new tracking system for a pilot program you are launching. You will need to configure your existing system to implement a new pilot program anyway, why not try out a new tracking system as well? Pricing of IT systems are dynamic and evolving. It is worth experimenting with how you procure systems as well.
Michael Stockard is an independent consultant at Stockard Energy Advising and is a member of the Advisory Panel at ANB Systems. Michael has over 39 years of experience in the design and implementation of demand-side management programs.