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Valuation and pricing of software licenses to support supplier–buyer negotiations: A case study in the automotive industry

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  • Frank Bodendorf
  • Manuel Lutz
  • Jörg Franke

Abstract

Licensed standard software can be replicated millions of times at near zero cost for the supplier and poses immense challenges for purchasing and cost managers. A model is introduced to evaluate the appropriateness of software prices and thus to support the negotiation and decision process regarding suppliers. The model determines the “value to customer” of a software product using conjoint analysis and converts that value into a theoretical license price. In a case study coming from a large Original Equipment Manufacturer (OEM) it is shown that the developed conjoint model can successfully be used in practice and suggests realistic purchase prices.

Suggested Citation

  • Frank Bodendorf & Manuel Lutz & Jörg Franke, 2021. "Valuation and pricing of software licenses to support supplier–buyer negotiations: A case study in the automotive industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1686-1702, October.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:7:p:1686-1702
    DOI: 10.1002/mde.3336
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    1. Bodendorf, Frank & Xie, Qiao & Merkl, Philipp & Franke, Jörg, 2022. "A multi-perspective approach to support collaborative cost management in supplier-buyer dyads," International Journal of Production Economics, Elsevier, vol. 245(C).

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