Interesting question, Suresh.

As you point out capped-price ELAs work against the vendor regardless of initial quantity one price. This is true (IMHO) for two reasons...

First and obvious, the upside is capped. Second, less obvious, the customer gets more and more value without paying anything.

We believe customers ought to pay for value under all circumstances even though they may not pay much per unit on the margin.

I would suggest dealing with this in two ways.

If the customer wants an Enterprise license, quote one that you think is fair to you. Cap it out when they reach X CPUs where X is a very large number and by which time they will have paid you A LOT of money. Alternatively, quote a high price that you would accept (e.g. multiple millions).

Of course whatever you think is fair, the customer may not. (And if they do, I guarantee that you have negotiated against yourself and won't be treating yourself fairly.)

I think the right way to do this is to develop a discount schedule whose unit price drops until you reach some number of CPUs and then it flattens out so it looks like "beyond X CPUs the unit price is Y per unit". Make sure the X is large enough so the customer might reach it. Also make sure the less-than-X CPU prices drop off reasonably but not so sharply that the unit price of Y isn't too small.

Hope this helps...

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