> Customers know this, and are often apprehensive about these types of deal negotiations, so they tend to only go through this process if absolutely necessary
Unfortunately, for big enterprises, this isn't true. They (as a company, maybe not the individual developers inside it) want to go through it. They're the ones who start the RFP process, and as the service provider, you'll either follow their process... or they'll buy from someone else, no matter how much better your API may be.
It depends on the scenario, but this isn't as insane as it may sound. It's less relevant for, say, a SMS API which is interchangeable, but if you provide an API service that is deeply intertwined with the processes in that enterprise, the company needs to evaluate the different providers. This process is time-consuming one way or the other... they might as well let the different providers do most of the work for them (which makes sense, because they know their services).
As for the price negotiation itself: I agree.
Also, an enterprise sales process and usage based pricing are not mutually exclusive! You absolutely can sell usage based pricing, and both parties hopefully get the benefits listed.
I've seen this in my own business. They can't turn this process off even for a trivial purchase. If you let them they will drag you into the enterprise sales process whether it makes sense for you or not.
This is why there is a dearth of software in the middle of the market. You can sell something for less than $1000 because customers can expense it. After that the sales process forces up costs so much that you get "contact us for prices" and the hard sell.
Joel Spolsky wrote about this in detail, OMG, fifteen years ago:
> There’s no software priced between $1000 and $75,000. I’ll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton. And with all this, the cost of making one successful sale is going to average about $50,000. If you’re sending salespeople out to customers and charging less than $75,000, you’re losing money.
I work for a huge enterprise software vendor and even internally I’ve heard the rise of the cloud as “don’t have to talk to a sales guy as a service”. I was sitting in the room when one of our clients got fed up with our sales process (we’ll have a quote to you in two weeks) and called a competitor, who had a solution spun up in AWS in under 5 minutes.
Unfortunately enterprise sales are a self perpetuating cycle. Vendors do it because customers want it, and customers do it because that’s how the vendors are set up to work, because customers have been demanding it for so long.
What those customers actually want is long term stability and someone to blame when things go wrong. The drawn out sales cycle is just one manifestation of that, but doesn’t have to be the only one.
> “don’t have to talk to a sales guy as a service”
I haven't heard this before, and it's great. I always get a chuckle when customers are dumbfounded that they don't have to have a call with us before using Geocodio. They're so used to the self-perpetuating sales pattern you mentioned that they're confused it could be so straight forward.
Unfortunately, for big enterprises, this isn't true. They (as a company, maybe not the individual developers inside it) want to go through it. They're the ones who start the RFP process, and as the service provider, you'll either follow their process... or they'll buy from someone else, no matter how much better your API may be.
It depends on the scenario, but this isn't as insane as it may sound. It's less relevant for, say, a SMS API which is interchangeable, but if you provide an API service that is deeply intertwined with the processes in that enterprise, the company needs to evaluate the different providers. This process is time-consuming one way or the other... they might as well let the different providers do most of the work for them (which makes sense, because they know their services).
As for the price negotiation itself: I agree.
Also, an enterprise sales process and usage based pricing are not mutually exclusive! You absolutely can sell usage based pricing, and both parties hopefully get the benefits listed.