Pay As You Grow the name itself says that you are asking your customer to pay you as they grow. In this article I am discussing its suitability in various situations.
First of all – why customer should pay you as they grow? Or why you should not ask the customer to pay the license cost upfront rather than getting paid over a period of 3-6 years?
The answer lies in only one thing. It is easier to spend money in small chunk, reap the benefit of that investment and share your success with the vendor. Oops – the moment customer is sharing their success with the vendor – the vendor can start considering themselves as their business partner. Isn’t that something we all dream to become. We often want customer as a partner and we don’t want just one time transactional relationship.
Following are the possible scenarios in which pay-as-you-grow model is really helpful
- When you want your customer to buy only what they need today, knowing they can easily scale up the software as demand grows with a simple software license upgrade
- When you are willing to invest into customer’s business so that you can grow along with your customer. In this case even though both parties understand that the cost of license is more, the customer needs to pay less upfront, which increases their buying capability
Now suppose, there is a hospital with 100 beds and there is another hospital with 1500 beds. Both needs all the feature of HaMSa (the Healthcare Management Solutions) and both the hospitals are willing to buy the hardware recommended by Walking Tree. How do we differentiate prices for these two hospitals?
Going by just number of beds look so unfair. However, charging same cost to both the hospitals may not be a practical situation as well. This is where companies need to understand their implementation process thoroughly. Also, they need to understand that the hospitals with 1500 bed will be more demanding and they require more support (technical as well as functional). Also, overall implementation phase will be longer to ensure that the software is able to cater to the needs of most of the users.
Assuming that you want to invest in your customer, how would you try to play safe, in case customer is not fair with you? I have seen that sometimes customers with relatively high moral values also try to look for the workaround. However, it will not be fair for you whenever such customers get away with the workaround, specially when you have invested with an assumption that they will pay you when they grow. So, what should you be doing? Let’s see if some of the following basic steps will be helpful:
- Ensure that license upgrade becomes important for the customer and without upgrade system stops working
- Provide early warning to the customer – through various means – may be start showing how many more beds can be added or how many more patients can be admitted
- Give some grace numbers as well – but have some escalated communication – may be – there should be a way so that you can inform yourself and make a phone call to your customer
Having said that – ultimately it boils down to packaging your software to be able to meet different kind of customers. There may be customers who would like to buy only some of the modules, while other customers may like to pay the complete license cost upfront, while many customers would like to go for pay as you grow model. So, make yourself flexible to be able to meet the need of most of them!