Network Effects and Pricing Models in the Social Enterprise

Like any other social network, the value of an enterprise social network is tied to the number of active users. In general, the more users the more value – more knowledge shared, more questions answered and more connections made. In this case, does the per-user pricing model of many enterprise social software tools make sense? Enterprise microblogging provider Socialcast doesn’t think so, and today the company announced a new pricing plan to deal with that fact.

“Our most successful deployments are those that are enterprise-wide and boasting the largest, most comprehensive internal networks,” Socialcast CEO Tim Young writes. “As more people join the network, greater value is created – with every new member that joins comes another potential answer, knowledge source, and idea.”

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Socialcast will now offer an enterprise-wide license that will let organizations pay a single annual fee for the product without worrying about how many users are being added. In contrast, Yammer charges $5 per user per month and Salesforce.com Chatter costs $15 per user per month. Socialcast hasn’t disclosed the cost of an enterprise-wide license, and we’re not sure how it will compare with volume licensing agreements with other vendors.

The company will include its Reach extension, which we covered last year. Reach enables customers to embed Socialcast in existing browser-based enterprise applications.

Will flat pricing encourage companies to roll-out social features to more employees? It’s too early to say, but it seems like a step in the right direction. I suspect social roll-outs may be hindered by the idea that some employees don’t “need” to be on the enterprise microblog. But the decision to leave some employees behind probably isn’t improved by those per-user license fees. A big factor in whether this will be successful is how the cost compares to per-user licensing.

Socialcast was founded in 2005. It’s funded by Menlo Ventures and True Ventures. Socialcast has solid traction in large enterprises. CEO Tim Young says 15 of the Fortune 100 are customers.

In addition to Yammer and Chatter, Socialcast competes with a plethora of enterprise social software vendors, including Blogtronix, Qontext, Socialtext, StatusNet and TIBCO tibbr.

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