I don’t like the “Pay what you Own” construction used by many software vendors. And as I don’t like it, my customers probably don’t either. Like I explained in last week’s blog, paying for what you own locks people in both technologically and financially, and takes away every opportunity to move forward. The solution lies in switching to a vendor that lets you pay for actual usage, AKA the “Pay what you Use” model. Now let’s say you’re one of those people that made it to the other side, and started working according to this new and fairer principle. How can you expand the Pay what you Use model to your own customers and make them as happy as you are? I’ll tell you below.
I’m free! I’m free!
So, you purchased cost-efficient software that you pay for according to the Pay what you Use model. Must feel like a relief! Bye bye to the times you paid too much money to cloud providers and middleware vendors, hello flexibility to choose who you work with, when to scale up (or down) and tap computer power whenever you need it. That feeling right there is what you want your customers to have too. They too want to innovate, shift their budget from CAPEX to OPEX and be more flexible. The great news is you can pass on the Pay what you Use joy onto your own customers, by monitoring their exact usage of your services.
Which type of business are you?
In this story, we must distinguish two different types of businesses. First, there are businesses that sell services that you can count in terms of (e.g.) time. Take Zipcar, an American car-sharing company that lets you pay for the ride instead of the car. Zipcar simply measures the number of minutes the ride took and charges the user accordingly. Then there are businesses that gather data (like a lot of data). Data might not even be their core business; it still represents value and can be sold to other businesses that need the information for their own products and services. The question is: how can you monetize the value of this data, that’s already between your company walls? I’ll tell you the answer through an example.
“They had two choices: pouring the data down the drain or try to sell it. Obviously, they went for the second option”
Monetize your APIs smart transit-style
A well-established transit company I heard off had been collecting data on their train schedules for years. This had resulted in a goldmine of historical and future data that many other transit players would love to get a hold on. The company had two choices: pouring the data down the drain or try to sell it. Obviously, they went for the second option. They chose to do so by exposing the data in a Pay what you Use subscription model. The company deployed APIs through an open platform, a proven model for data monetization as you calculate the number of API requests per day or the amount of data consumed per time slot. Users then get a bill based on actual usage and that’s it. What an easy way to earn money with data you already collected!
…Or change your business model TomTom-style
In the case of the transit provider in the last paragraph, data collection is not even their core business and yet they turned it into a source of revenue. They didn’t have to change anything about their existing services; they just decided to make more money and they did. So far, I’ve given you nothing but good news. But I’m not done yet. There are examples of businesses that monetized their data using open API platforms, and completely changed their business model with it. The ultimate example is TomTom. This company started as a producer of GPS navigation systems for cars, but was outpaced by competitors with more accurate systems like Google. So instead of going down with their old business model, they transformed it. TomTom now sells mapping data to car manufacturers like Volvo and Volkswagen, turning their knowledge on driving behavior, road blocks and traffic flows into a product. And with success: TomTom is back at the top of its industry and shows steady growth rates.
The key to freedom
Apart from a good idea, what success stories like those of the transit provider and TomTom have in common is that they’re free from any form of lock in. This brings us back to the conclusion of last week’s blog, where I explained how the Pay what you Use model helps businesses avoid lock-ins in terms of technology, finances and operations (I won’t list them again as I’ll only repeat myself). The transit provider, for example, chose to work with WSO2, an open source vendor that, unlike most others, offers both a Pay what you Own and Pay what you Use model. Thanks to the Pay what you Use model, they were able to instantly implement their APIs while spreading the costs over a longer period of time. If they’d chosen to work with, let’s say, an Oracle-like product, this would’ve been the other way around.
To sum up: you can deploy the Pay what you Use model to make your customers happy, to monetize your existing data or to even completely change your business model. To do so, you need a software vendor that in turn provides you with a Pay what you Use option and helps you get started within weeks instead of months without locking you in technologically, financially or operationally speaking
Want to get started with an open API platform yourself? Download our API selection guide and find out which vendor matches your requirements.