In one of my discussions with Paul Grayson, Founder and CEO of Alibre, I asked him how his company could afford to sell a history based parametric modeling system that uses the ACIS modeling kernel from Spatial and 2D DCM from Siemens PLM for $197 and still stay profitable. I asked him what he had to say to his competition who thought that his company’s pricing was not feasible. This is what he had to say:
“We have a very low cost structure and we are constantly looking for ways to save money so that we can pass that on to our customers. In fact, the last couple of years have been an excellent time to reduce costs. Because of the recession just about everything is getting cheaper. I approve most of our expenditure personally. Every time anyone wants to purchase a new computer or a new phone system or say to take someone like you to the Scarborough Renaissance Festival (Ha! Ha!) I personally look at all the expenses.
Actually, it part of our philosophy and the philosophy behind our products. Technology prices are constantly going down. Computers are getting more powerful. You got Moore’s Law. We believe that companies should be in business in part to deliver that to customers. You will notice that we have two phones on every desk. That’s because we are in the middle of shifting phone systems. The old system provides long distance provide from AT&T. The new system is the much cheaper Voice Over IP. That switch is going to save us $30,000 a year. We recently renegotiated our lease. That saved us $60,000 a year. We are getting a new chat system for tech support which is going to save us $10,000 a year. So you see, we are constantly looking out for lower cost solutions to use for ourselves which makes us more profitable and lets us pass on the benefits to our customers.
So it starts to being frugal but then extends to doing things very efficiently. Unlike my previous company, Micrografx, which had 10 foreign offices and a lot of overhead associated with that, Alibre is lean and hence extremely nimble.
Instead of wondering whether we are feasible or not, our competition should actually be embarrassed that they do the same thing so inefficiently and charge so much money.”