Software Acquisition Risk Share – Duplicate Parts Analysis

The changing interaction between software companies and their clients is something that has always struck me as curious that the financial agreement between software organizations and their clients has always been so diametrically opposed.

What do I mean by that exactly? When a company buys a perpetual license of software from a software provider, the customer effectively takes all the risk for the success, or otherwise, around the deployment of the solution.

At the point the purchase order is delivered to the software company the provider is dissolved of any financial risk going forward. On the other hand, the real work for the customer has only just started. From a financial perspective, the software company is effectively finished at this point, they have already extracted the clear majority of dollars from the customer that they are going to see over the next couple of years. True there is maintenance and possibly some servicing revenue, and of course reputation, but this is often dwarfed by the value of the software licenses delivered.

On the customer side, they have paid out a significant sum of money with no guarantee of success, hence my comment they are taking all the risk for the deployment.
I believe the cloud, and the recession are making organizations rethink their buying strategy when it comes to the balance of risk between themselves and the software company they are buying products from.

This repositioning of risk between the customer and the software company, is in my opinion long overdue. I also believe this is not just restricted to cloud-based solutions.

Clearly with a cloud-based solution, based on a monthly subscription, the customer has far more control over their expenditure, and if not happy can simply turn off payments. But the impact of the cloud, has also forced companies to review how they engage with all their suppliers, and look to their suppliers to take more of the risk burden.
We have several engagements that highlight this change in thought process on how manufacturing companies purchase software solutions.
As an example; we offer a service that analyses how many duplicate components a manufacturing company has in their database. For us a duplicate component is something that has identical geometric properties but is logged under a different part number.
In recent times, we have migrated from this being a simple purchase of our software and some associated services to being a pure risk share engagement between us and our customers.

Duplicate Parts Analysis

We, as the solution provider, do the total analysis, we find the number of duplicates, how often the duplicates appear, the cost burden of the duplicates, the profit or loss associated with the components, all totally free of charge.
But then receive a percentage of the savings our clients obtain from the cleaning up their database of duplicates.

Five years ago, this type of engagement would never have happened.


For more information download: Duplicate Analysis PDF

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