Wednesday, March 23, 2011

Let Me Charge You Per User.

Yesterday I saw the following tweet from LinkedIn:
“RT @benparr: Linkedin Surpasses 100 Million Users [INFOGRAPHIC] –

This led to me thinking on how the business model in Information Technology (IT) has shifted to defining business value from the perspective of a user. Let me explain.

Back in the day, vendors made money by charging customers on the number of CPU’s or the number of transactions their software supported without degrading the quality of the software service. There were several companies including Microsoft, Oracle, SAP, SAS and others which followed this model.

When did the transformation begin? I believe it began when Google came along and started buying companies like DoubleClick and other online advertising companies. This opened up the world to a regular Joe or in this case a regular Enoch to generate revenue via online pay-per-click ads (PPC). At that time Google, Yahoo and other businesses recognized that individuals like you and me have a specific business value and the individual can increase his business value by how pro-active they are in using these online technologies. Then came Facebook with Microsoft’s help (Mr. Zuckerberg, you are one lucky dude!) started to leverage the business value from its users. Facebook and others recognized that money could be made via targeted ads and analyzing user behavior. They inturn showed their business partners that there is a better return on investment (ROI) on the marketing dollars by using logical platforms created by companies like Facebook and Twitter.

Recently I heard on NPR (this may be out of style after congress is done slashing funding for this service) that investment companies are investing in companies like Facebook, Groupon, LinkedIn, Twitter, etc., etc because they are generating money and everyone is excited about. These companies see their users as assets of a company. Switching gears a bit, Google is offering their cloud services to different companies and they are charging businesses a flat fee for the service which is based fee per user per year rather than fee per CPU or transaction. This model is cleaner since it identifies per business associate and it doesn’t require a techie geek like me to figure it out. Therefore “Go Fish”…I mean go figure, the business world always understood that its users are its life blood and now IT is aligning itself to it.