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2006 Will Be the Year for Price Management and Profit Optimization Solutions
Today, enterprise budgets average up to $5 million for pricing solution deployments, indicating the growing breadth of PMPO initiatives. The majority of companies implementing these solutions are Fortune 1000 enterprises that have realized impressive ROI from profit improvements of up to 20%. No other packaged software in the market delivers the same type of top-line benefits while addressing bottom-line inefficiencies.
As the market gains momentum, a number of leading indicators signal the growing role that PMPO will play in top-level business strategies:
• Pricing solutions are increasingly becoming enterprise-wide deployments, often large-scale global rollouts.
• Leading systems integrators and consulting firms, such as Accenture, Deloitte and IBM Global Services, are building practices to facilitate PMPO strategy, process reengineering and technology implementation projects.
• An increased number of educated and qualified RFPs signal a downstream pull for pricing solutions.
• C-level executives are refocusing on revenue and margin growth rather than cost cutting.
Yankee Group found that enterprise investment in PMPO leads to 10% to 20% profit improvements at a rate unlike any other packaged software solutions on the market. In addition, enterprises experience a significantly improved margin contribution and revenue uplift, as well as better managed market volatility and supply balance. Many leading companies that already adopted PMPO solutions have either met ROI expectations or, in many cases, exceeded them.
"PMPO has been the best-kept secret of early enterprise adopters, many of whom are using these solutions to outmaneuver competitors and gain market share," said Kosin Huang, program manager at Yankee Group. "Many of these companies are hesitant to attest to the amazing ROI stories from their implementations, for the fear of losing a unique competitive advantage."
During the next 2 to 3 years, acceleration of comprehensive end-to-end pricing projects that span strategy, process and technology will establish PMPO software as a fundamental pillar of a complete price management initiative. Enterprises are beginning by rolling out a price optimization, price execution or price analysis solution; however, these deployments are self-funding and are building momentum for the adoption of the full suite of pricing capabilities, which includes all three modules.
