As a regular reader of Joel On Software and heading a group prepared to go into the ASP realm with dotProject and Mantis, I read this post with great interest today. It's a long post, but I'll summarize it here:
Software companies and software buyers have directly competing goals from the second the contracts are signed.
Essentially, once a contract is signed, the software company's goal is to continue improving the product or building the next product for the NEXT client, not you. They know you have already signed the contract and have committed to the upfront licensing fees, the annual fees, and it's unlikely that you'll back out. This creates a fundamental disconnect between these two groups that must be recognized.
Phil sees this problem and suggests that an ASP (Application Service Model) model can resolve it if applied correctly. Here are the pearls of wisdom that I've discerned.
First, instead of the standard monthly billing, he suggests a quarterly process. This allows time for problems to be addressed and resolved each cycle without constantly having to rush towards deadlines. Since many businesses work on Net-30 anyway, it makes quite a bit of sense.
Next, you must get buy-in from the client up front. Make them commit to using the tool and making it their own. During the initial deployment, training, documentation, and involvement are a must.
Next, since every customer must be satisfied, the entire entire selling organization has a goal to focus upon. The disconnect of always building the next version while simultaneously supporting old versions becomes a much more financially beneficial thing to do.
Next, it evens out the revenue flows. Instead of having “record quarters” of sales and nothing for months, this will create a more steady growth – as long as customers are satisfied.
Finally – and in my opinion – most importantly, it assures the customer that a huge upfront cost is not being risked for a tool that may or may not fit their needs. Instead of the $100k software going unused, they can simply stop paying for it after six months and only waste $20k.
This is the route that we'll be going with CaseySoftware. Our hosting packages of dotProject and Mantis will be coming on shortly and all monthly plans will have quarterly equivalents offering slight discounts. Hopefully this can assure our customers that the operation and maintenance of their systems are of the utmost priority to us. Towards this goal, we will be announcing strategic partnerships in the next few weeks.