Skin in the game

19.12.2005

ASG, a systems management software vendor in Naples, Fla., certainly appears to have gotten the message. "Customers have reached the [limit] of what they're willing to pay for enterprise software, and they're looking for alternatives," acknowledges Jim Bladich, ASG's vice president of sales operations. "IT expenditures are going up as a percentage of revenue, and it's beginning to be scrutinized."

To its credit, ASG is going the skin-in-the-game route. Last summer, it introduced a revenue-based licensing model that may be a compelling alternative for companies that are dissatisfied with traditional, capacity-based pricing. There are various options under the model, according to Bladich, including one that enables the user company to lock in the fee so that if it's projecting steady revenue growth, the licensing fee stays the same for the duration of the contract.

But consider this: Much of what ASG does is geared toward improving business performance by means of offerings such as business service management software. And better business performance stands to generate more revenue. So what's especially intriguing about ASG's revenue-based model is the case in which a contract stipulates that the fee paid to ASG goes up or down based on the track of the user company's revenue. Suddenly the vendor has a real stake in the customer's performance.

The model's not perfect, and it's not for everybody. But it's a positive step because it's the result of ASG listening to its customers. And vendor listening is a welcome respite from vendorspeak.