As utilities embrace digital transformation, flexible pricing models offer a logical-yet-untapped competitive differentiator for energy software providers
A new report from Guidehouse Research explores the evolving landscape of software pricing models for energy providers.
Electric utilities, by and large, trail other industries in the pace of digital innovation. Emerging competitive pressures, however, are prompting a paradigm shift in utility motivations and technology innovation. Just a decade ago, many utilities were still employing rudimentary approaches, such as excel spreadsheets for customer and asset data, and exclusively using on-premises software. Yet, as utilities became more familiar with terms like smart grid, cloud, modularity, microservices, etc., mass adoption naturally followed—because it made sense.
According to a new report from Guidehouse Research, electric utilities are increasingly interested in alternative pricing models that directly align with their specific needs and objectives. While most energy software providers continue to employ simplistic pricing models, several have shifted towards flexible and tailored pricing models to enhance their overall competitiveness. This mirrors a larger macrotrend seen throughout other industries – from agriculture and healthcare to cybersecurity and oil & gas.
“There is a growing shift toward usage-, performance-, and value-based pricing among more innovative vendors,” says Mike Kelly, principal research analyst with Guidehouse Research. “Pricing model innovation is one of the next logical, lucrative, and untapped opportunities in the electric utility industry.”
According to the report, Guidehouse Research suggests energy industry software vendors should:
- Make value-based pricing an exploratory action item if not yet an available purchasing option.
- Accentuate and differentiate via value-based pricing to hedge against competitive disadvantages.
- Develop creative, tailored, and flexible pricing models under the banner of customer choice.
The report, Energy Software Pricing Models Are Ripe For Value-Based Innovations, explores the evolving landscape of pricing models in the energy software market. It examines how most vendors continue to rely on traditional pricing approaches that offer customers limited flexibility and choice. It also analyzes how utilities’ increasing preference for alternative pricing models presents a key opportunity for software providers to modernize their strategies and close a long-standing market gap. An executive summary of the report is available for free download on the Guidehouse Research website.
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