Enterprise software pricing must shift from cost-based models to value-based pricing. Integrating value engineering quantifies the software’s impact on core operations, aligning price with customer benefits.
(By Ashish Nayyar, Vice President & Head of Pricing & Commercials at IBS Software, and a leading voice on value-based pricing in the enterprise software space)
The Strategic Vacuum in Enterprise Software Pricing
Despite massive advances in product design, user experience, and go-to-market sophistication, pricing in many enterprise software companies remains surprisingly archaic. It’s too often driven by internal cost structures, competitor price tags, or—worse—gut feel. Even in firms with billion-dollar revenues, pricing is still viewed as a tactical lever: a spreadsheet operation done post-facto, often by sales ops or finance, with little alignment to actual customer value.
This needs to change.
Pricing is not a clerical function—it’s a strategic function. And nowhere is this more critical than in the world of enterprise software, where deals are few but large, stakeholders are many, and customer outcomes drive renewals, expansions, and advocacy.
The companies that understand this are quietly building Pricing Centers of Excellence. But simply creating a pricing function isn’t enough. The real unlock comes when pricing is infused with value engineering—systematically quantifying, articulating, and anchoring price to the business impact delivered.
Why Value Engineering Is the Missing Link
Enterprise buyers today are no longer sold on technical superiority alone. They are accountable to CFOs, procurement heads, and boards. Every software investment must demonstrate its role in powering the organization’s core operations—especially in cases where the software is directly responsible for running the business, such as core banking platforms. In the banking sector, these systems are not just important—they are mission-critical. A failure or disruption can halt transactions, impact customer trust, and effectively bring the bank’s operations to a standstill. At the same time, modern core banking software also shapes the customer experience, enabling faster services, digital agility, and personalization—making it not just an operational backbone but a key competitive differentiator.
This is where value engineering comes in. It bridges the gap between what the software does and what it’s worth to the customer.
Yet in many organizations, pricing teams and value engineering teams (if they exist) operate in parallel tracks. One determines “what we want to charge.” The other defines “what the customer could gain.” But rarely do the two align deeply enough to drive a deal.
In my experience leading pricing transformation at organizations like Airtel Business, Nucleus Software, and now IBS Software, I’ve found that real power lies in integrating these two functions. When pricing is informed by value engineering from the start—not just during RFP defense—it becomes a strategic act of value capture, not just price setting.
The Case for a Strategic Pricing Function
Let’s take a step back and define what an elevated pricing function actually looks like in the enterprise software context. At its core, it must be:
• Value-Led: Anchored not in cost-plus or competitor benchmarks, but in the tangible business value delivered.
• Cross-Functional: Collaborating deeply with product, sales, finance, and customer success—not siloed or reactive.
• Customer-Informed: Built on a strong understanding of customer segments, use cases, and success metrics.
• Governance-Oriented: Backed by a clear delegation of authority (DoA) that balances agility with margin discipline.
• Enablement-Focused: Equipping sales with pricing guardrails, value calculators, objection handling scripts, and negotiation frameworks.
The magic happens when these capabilities are built not just as processes—but as mindsets.
At Nucleus Software, for example, we rebaselined AMC pricing by aligning it to the true value delivered to long-standing customers—using a value framework that considered usage intensity, business criticality, and impact on operations. This move alone transformed AMC from a ‘cost to serve’ recovery to a strategic growth lever—leading to significant uplift in profitability and customer engagement.
Value Engineering in Action: A Real-World Lens
Too often, software pricing is reactive—determined at the eleventh hour after solutioning, demos, and technical validations are done. But when value engineering is baked into the discovery process itself, the narrative shifts from “here’s what we’re selling” to “here’s what you’re gaining.”
This requires:
• Early Engagement: Collaborating with sales from the opportunity qualification stage—not just at the tail end of the deal cycle.
• Quantified Value Models: Dynamic calculators that model the specific impact of your solution on a customer’s key metrics—based on industry benchmarks, customer-provided data, and conservative assumptions.
• Executive-Ready Storytelling: Translating technical capabilities into boardroom language—TCO savings, EBITDA impact, productivity improvements.
• Value Validation Frameworks: Post-implementation measurement tools that track whether value was actually delivered—building credibility for renewals and upsells.
By integrating these practices into the pricing process, you’re no longer just negotiating a number—you’re codifying a business case.
From Margin Defense to Growth Acceleration
A mature pricing function doesn’t just protect margins—it accelerates growth. Here’s how:
• Higher Win Rates: Deals priced with a clear value articulation are easier to justify to procurement and less likely to get squeezed on discounts.
• Reduced Sales Cycle Time: When the business case is clear, decisions get made faster. Pricing doesn’t become a bottleneck.
• Increased Deal Sizes: Value-based pricing allows you to move beyond modules and features to outcomes—enabling premium positioning.
• Better Customer Fit: When you price based on the customer’s real needs and value potential, the chances of buyer’s remorse or churn reduce drastically.
In today’s environment—where enterprise budgets are tight, CFOs are more involved, and every purchase is scrutinized—the above are not just nice-to-haves. They are business imperatives.
Making Pricing a CEO-Level Priority
So where does this leave us?
For enterprise software companies, pricing can no longer be a peripheral function. It must sit at the heart of commercial strategy—alongside product innovation and sales excellence.
And this change must be CEO-led.
Because pricing, done right, influences every aspect of enterprise growth. It shapes how your product is perceived in the market, guides what customer segments you pursue, defines the margin profile of your company, and drives your ability to reinvest in R&D, customer success, and sales enablement.
The call to action is clear: don’t let pricing be an afterthought. Elevate it. Integrate it. Equip it with value engineering. And make it a boardroom conversation—not just a sales approval gate.
Summing up: Beyond the Spreadsheet
In summary, pricing in enterprise software must evolve—from being a number on a quote sheet to a narrative about customer value. And the bridge to that future is value engineering.
Having led pricing transformations across industries and geographies, I’ve seen firsthand that this shift is not only possible—it’s profitable. It strengthens your brand, deepens customer trust, and makes your business more resilient in a world where value, not volume, wins.
Ashish Nayyar is a seasoned professional with a wealth of expertise spanning more than thirty years in the dynamic realms of Enterprise Software Products and ICT sectors. His niche lies in the domain of Value-Based Pricing and commercial leadership, where his insights and strategies have made a significant impact. He serves as a trusted advisor to business, sales, and product leaders, offering invaluable insights and guidance from a pricing performance perspective.