Pricing!!??

Pricing drives so many decisions. The price model for Dynamics 365 is different from Dynamics GP. First let’s discuss GP pricing.

The first three users of GP cost $3,000 one time. Additional full users are $3,000 each. Most of the modules available are in the bundle delivered at this price point. The only annual cost is 18% of the above numbers paid annually to keep the software version current. In the GP world, upgrades must be installed. A typical upgrade effort runs $3k to $6k, more if your system is customized. Don’t forget a SQL license for each user – usually $150 or so, each.

Dynamics 365 for Financials – Business Edition, costs $40 per user, per month.   There is no annual maintenance and no upgrade fees. Product functionality is limited to core financials and additional functionality is planned to come from ISV’s (Independent Software Vendors) at unknown prices.

How can a customer compare these two models?

First, recognize the differences. Dynamics 365 is in the cloud only; GP can be put in the cloud through hosting or run on local servers. Dynamics 365 has limited functionality compared to GP, so you might have to purchase additional ‘extensions’ to meet those needs. Dynamics 365 is a brand-new product and GP is a 15 year highly mature product.

The annual cost for a Dynamics 365 user is $480 ($40 per month times 12 months). The product is natively in the cloud from the start. It cannot be customized since all users, at every customer, run the same software. There are no upgrade fees. A 5-user system would run $2400 per year and total cost for 5 years would be $12,000.

The cost for GP is a onetime cost for software, with annual maintenance. Hosting costs (if you want to have GP in the cloud) are generally about $200 per user per month. Most customers upgrade every 2 or 3 years at an average of $5k. A 5-User system would cost $9,000 the first year with maintenance of $1,620. The five-year cost would be $17,100. Add $12,000 per year for hosting if you want to be in the cloud. The 5-year cost with hosting would be $77,100!!

Is this a valid comparison? We are probably comparing apples with watermelons.   These are two vastly different products and features are vastly different. Extensions of Dynamics 365 could drastically change your costs and experience.   Chances are, these two products meet the needs of different types of customers.

It remains to be seen what types of firms will be able to be successful with Dynamics 365. And while the price of Dynamics is attractive for customers, it remains to be seen how implementation partners can be successful helping customers use it. Without a strong partner channel, customer use may be limited to entry level business users.  

Dynamics 365 for Sales was also announced at the same time. The press claimed that the price was set low to take sales from Salesforce. Did the pricing for Dynamics 365 Financial get set too low? I’d be interested in your thoughts.

 

Bill Aiton, President
baiton@ssiconsulting.com