Time Capsule: Despite What Vendors Say, Offering a Payment Plan Doesn’t Make Their Product SaaS or You Their Partner

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in April 2009.

Despite What Vendors Say, Offering a Payment Plan Doesn’t Make Their Product SaaS or You Their Partner
By Mr. HIStalk

There was a time, before software vendors and consultants, when the word “partner” was pretty clearly defined. Partners signed a contract to be in business together, sharing profits and losses. They worked side by side, using their respective strengths to meet agreed-on goals. Their interests were aligned.

(Partnerships as business entities are usually a bad idea, even though they sound civil and synergistic. You don’t get any tax breaks, nearly all partners end up fighting much of the time, the actions of one partner legally bind the other, and ownership is illiquid. Just so you know.)

Vendors and consultants always want to “partner” with you, at least by their definition of the word (“sell you stuff under the pretext of being a trusted associate looking out for your best interests instead of our own, which is clearly a bald-faced lie.) The word itself is uttered with such phony conviction and heartfelt emotion that you just might believe it anyway, just like when a frat boy whispers “I love you” into the ear of a drunken sorority queen hoping equally fervently to consummate a transaction that is beneficial to at least one of the parties involved.

As a thought leader and futurist (I’ve decided to call myself those vague terms and you should anoint yourself with them, too – the people I’ve seen using them without embarrassment don’t seem all that insightful), I’ve observed permutations of the already-bastardized “partner” moniker. Here are the flavors I just saw at HIMSS, for example.

• When talking to the IT geeks, vendors trot out the “Software as a Service” buzzword, even though they’re often selling the same old products that are priced the same old way. Despite the buzzword, I saw no evidence that most of those Johnny-come-lately vendors are offering the theoretical advantages of SaaS: lower prices, an open market for plug-in functional components, or a scalable and highly reliable/recoverable hosting model requiring nothing more than a browser-equipped PC. (If SaaS sounds familiar, that’s because you’ve heard it before under the then-cool buzzwords of Application Service Providers, hosted services, or if there’s a little snow on your chimney, time-sharing systems. It was and often still is a pretty good deal from some of those non-Johnny-come-lately companies).
• Some vendors, wanting to ride the buzzword gravy train but hamstrung by old technology and inadequate hosting infrastructure, turned SaaS into a financial concept. Subscription pricing is a way to sell the same application to the same user, only in a no-money-down pay scheme. You sign a contract and pay either a fixed amount or a fee that varies by usage. Most vendors, sweating nightly over revenue recognition, don’t give customers one of the key benefits, though: the option to cancel at any time. You might be paying monthly rent, but the lease is ironclad. (The best thing about subscription pricing is that what you pay is based on your level of usage. The worst thing about subscription pricing is that what you pay is based on your level of usage. You get in the door cheaper, but if you’re your project beats the odds and enjoys significant use, you’ll probably pay more than if you’d just bought it upfront. So, you’re betting against yourself.)
• The third (and for the customer, the best by far, which also makes it the least common) option is the “We Make Money When You Make Money” model. This is where the vendor puts their money where their mouth is, actually going at risk with you instead of just cooing sweet words into your ear, drop-shipping their wares, and then starting the hunt for the next sorority girl. Now you’re partners – you either sink or swim together. Interests are aligned. Most vendors wouldn’t dare offer that deal to hospitals. Hospitals aren’t very good at implementing products, mandating their use, and getting serious about reaping their ROI. No wonder vendors want to take their money and run.

So, let’s just drop this laughable pretense that hospitals and vendors are partners. Partnerships don’t involve one partner writing a check to the other. You might have a partner on the golf course, on the dance floor, or in bed, but when it comes to healthcare IT, there are only sellers and buyers.