Get Paid To Play: An Interesting Take On Software Pricing
Delivery of software via cloud storage systems, mobile opportunities, and, of course, local installations all make up the portfolio of delivery options. Software pricing can typically be broken down into two models: up-front and recurring. There are a variety of offshoots of these models with one example being freemium systems, which offer a free basic model and paid advanced functionality. Regardless of the model, the vendor gets paid for the software. They have to make money, right?
It turns out that numerous government agencies have adopted software that utilizes a different model. In fact, a software company will pay them to install their software. How can this work? Like most forms of government work, they pass the buck to John Q. Taxpayer, though in this case, the response has been overwhelmingly positive.
The company behind this model is NIC, a software company behind what they have dubbed “eGovernment.” With implementations for government agencies in 27 states, their user base has grown at a significant pace. They pioneered a payment model which they describe as “transaction-based self-funded”. Essentially, they are able to roll out software systems for government clients without requiring the expenditure of tax dollars. They do so by charging transaction fees anytime someone uses a function of the software.
For instance, in the state of Texas it is now possible to renew a driver’s license online. In addition to any state-controlled fees, the “eGovernment” software will charge a set transaction fee. They will then keep a portion of the fee for themselves and give the other portion to the government agency. Ultimately, it is a win for everyone involved. The state is able to upgrade an out-of-date and inefficient system, the software company gets paid without any raise in taxes, and Mr. Taxpayer doesn’t have to waste time standing in those soul-grinding lines at the DMV.
So, it has been proven that this model works for government agencies, but what about for the private sector? There hasn’t been widespread adoption by businesses yet but it certainly seems to have good potential. If a company can offer functionality at no cost to the main client, they will become very attractive indeed. Granted, the model has the potential for abuse, but the rewards seem to outweigh the risks.
Where do you think this model falls in the grand scheme of software implementation? Do you think software companies that cater to clients other than the government harness it? Have you heard of anyone else who has adopted this model? Let me know in the comments.