Cognos cuts its e3000 upgrade charges

PowerHouse, Quiz supplier wants to reduce barrier to new 3000s

Bob Berry has heard plenty of stories about his company’s upgrade pricing reputation. The director of customer operations for Cognos Corp. hopes a 40 percent discount off upgrade fees will change market perception about the Cognos hurdle customers face while upgrading to new e3000 systems.

“Years ago we were a Jersey barrier,” Berry said in an interview at HP World. “Today, we’re more of a speed bump. Speed bumps you go through slow, but you get past them.”

The reference to the three-foot high concrete lane barriers first used on New Jersey turnpikes might seem accurate to some HP 3000 shops. In a surveys and interviews, companies which rely on the PowerHouse 4GL or Quiz reporting tool regularly use verbs like “gouge” and “stick” while complaining about prices.

Berry, who said he’s always ready to talk to any e3000 customer about possible pricing (781.229.6600; bob.berry@cognos.com), envisions a new Cognos reputation based on a discount promotion running in North America. Until Oct. 31, the company will reduce its upgrade prices by 40 percent. The promo is being run in connection with exclusive e3000 North American distributor Client Systems.

The company introduced user-based pricing several years ago, but HP’s new unlimited license plan for its A-Class and N-Class e3000s has rendered that plan virtually meaningless. Now the prices ride in 15 levels across the HP 3000 line, based on CPU power. A full development license costs $12,500 at the bottom tier. Each tier adds $12,500 to the price, whether it’s an upgrade or a new purchase.

For example, a Tier 2 full-development license regularly costs $25,000. The discount promotion brings the price down to $15,000 for a single-processor A500 e3000. Berry doesn’t think this fee is unreasonable for a system that will cost “about $45,000, with options.

“We will do anything to make sure the customer’s serviced properly,” Berry said. “We knew where HP was going with their new hardware, and knew we couldn’t stay with our typical Cognos pricing and be even remotely effective in the business today.” He added that he expects another promotion will fall into place once the Oct. 31 deadline passes. “Any deal usually lasts 30 days beyond its expiration date,” Berry said, noting the Cognos quarter ends on Nov. 30.

Berry said the company made an initial reduction on the Cognos “old tier-based pricing,” then has added the promotional discount off that. He was clear the company “doesn’t allow trade-in equity” for existing customers buying new e3000s. “We don’t have to. If we did, it would cost you more, because I’d go back to my old tier-based pricing if we did.”

In essence, the company plans to charge for its products based on their performance on the newer, faster hardware. Cognos said it looked at relative performance in devising its new “pricing scheme. We tested it in thousands of combinations customers might do,” Berry said. “Based on throughput numbers, you are paying considerably less for [performance] the A-Class gives you than the old system.”

While some customers’ view is that extra performance is all HP’s doing, Berry does note the software hasn’t been static. “We do enhance the software,” he said. “The latest version is 8.39, not 1.0. We haven’t stood still, and we’ve introduced Axiant and PowerHouse Web.”

Cognos contracts are CPU-specific, so any upgrade of hardware carries a software upgrade fee. The costs for run-time licenses, or run-time with reporting, are 65-percent less than full development fees. The same A500 system with a $15,000 fee for full development will carry a $9,750 fee for Quiz, for example; Cognos first takes 35 percent off the fee, then discounts the remaining amount by 40 percent.

Berry said things have changed a lot about the cost of HP 3000s in the 12 years since he’s been in the market. “Back then the biggest machine was $1 million. We were only five or 10 percent of the value of the hardware. To stand still [at that percentage] I’d be out of business a long time ago. The reality is, software is becoming much more expensive.

“They all understand they have to pay, and the uplift charge can be excessive at times. But I made a commitment to Hewlett-Packard five years ago: they would never lose a hardware sale because of Cognos.”

Berry said that means negotiation on upgrade fees is a regular part of the process. “The perception out there is that we’re the big, bad ugly Cognos,” Berry said. “I’ve spent the last five years working my tail off to change that perception. Cognos will not stop any hardware sale, but we’re not going to give things away. It is a business, and I have to charge for software.”