Re: Practice: Pay-Per-Use

Kent,

I feel this payment model covers transactional systems pretty well.
But I have experience with Business Intelligence systems (you know,
reports and analysis tools for the Big Kahunas) and it´s very hard to
quantify the value of these systems based on a pay-per-use model.
Have you ever thought about how BI systems fit Pay-Per-Use?

Thanks a lot,
Luiz

On 5/4/05, Kent Beck <kentb-ihVZJaRskl1bRRN4PJnoQQ@xxxxxxxxxxxxxxxx> wrote:
>  With pay-per-use systems, you charge for every time the system is used.
>  Money is the ultimate feedback. Not only is it concrete, you can also spend
>  it. Connecting money flow directly to software development provides
>  accurate, timely information with which to drive improvement.
>    Lots of software is already pay-per-use. Telephone switches, electronic
>  stock exchanges, and airline reservation systems all charge you a fee per
>  transaction. While pay-per-use has business advantages and disadvantages,
>  the information it generates can help improve software development.
>    The ultimate form of pay-per-use I've seen was in a messaging product.
>  Users were charged per message. Each story in development was deliberately
>  selected to encourage more messages. Support for a new handset, for
>  instance, came with both a cost estimate and a revenue estimate. The team
>  analyzed the usage of the system to provide feedback for the accuracy of
> the
>  revenue estimates. The team used this information to optimize both cost and
>  profitability.
>    Today's typical arrangement requires the customer to pay for each release
>  of the software. Pay-per-release opposes the supplier's interests and the
>  customer's interests. The supplier is selfishly motivated to have lots of
>  releases, each containing the least possible functionality necessary to get
>  the customers to pay. The customer wants fewer releases (because of the
> pain
>  of upgrading), each containing lots of features. The tension between the
> two
>  sets of interests reduces communication and feedback.
>    Even if you can't implement pay-per-use, you might be able to go to a
>  subscription model, in which software is purchased monthly or quarterly.
>  With the subscription model, the team at least has the retention rates (the
>  number of customers that continue to subscribe) as a source of information
>  about how the team is doing. An even smaller change of business model is to
>  weight contracts more toward support fees and less toward up-front revenue.
>    One objection to pay-per-use is that customers want predictable costs. If
>  the price advantage of pay-per-use is large enough, customers may not mind.
>  A team using the information provided by pay-per-use should be able to do a
>  much better job than a team relying for feedback only on license revenues.
>  
>  
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