Re: Practice: Pay-Per-Use

Kent, 

let me use the Balanced Scorecard as an example. The BSC is a BI app
intended to map and communicate the company's strategy and provide
feedback on whether the company is achieving its strategic goals. It
is a read-intensive, non-transactional app and a query to the BSC
doesn't provide an easily quantifiable return.

How does PPU can be used in such a case? Monthly subscription is
definitely an option, and it usually includes support and maintenance.
Any other options?

Thanks a huge lot,
Luiz Esmiralha

On 5/10/05, Kent Beck <kentb-ihVZJaRskl1bRRN4PJnoQQ@xxxxxxxxxxxxxxxx> wrote:
>  Luiz,
>  
>  I haven't thought a lot about the kind of systems you describe.
>  Monthy/quarterly subscription would be a step towards to PPU compared to
>  license+support. Another accountable pricing approach would be
> gain-sharing,
>  where you figure out what kind of metrics are supposed to improve based on
>  use of the system and share the cost savings, revenue increase, or
>  profitability improvement between the producer and customer. 
>  
>  Do you have a particular system in mind? Perhaps with more context the
> group
>  can come up with more concrete ideas.
>  
>  Kent Beck
>  Three Rivers Institute
>  
>  > -----Original Message-----
>  > From: xpbookdiscussiongroup-hHKSG33TihhbjbujkaE4pw@xxxxxxxxxxxxxxxx 
>  > [mailto:xpbookdiscussiongroup-hHKSG33TihhbjbujkaE4pw@xxxxxxxxxxxxxxxx] On 
> Behalf
> Of 
>  > Luiz Esmiralha
>  > Sent: Friday, May 06, 2005 10:01 AM
>  > To: xpbookdiscussiongroup-hHKSG33TihhbjbujkaE4pw@xxxxxxxxxxxxxxxx
>  > Subject: Re: [xpe2e] 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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