Proving Your Tech Costs Less: Charge Based On What You Used To Pay

I’ve been reading Andy Kessler’s latest (not yet released) book, How We Got Here : A Slightly Irreverent History of Technology and Markets, and one of the themes of the book is how history seems to repeat itself. The stories involving the industrial revolution have clear parallels in today’s internet-enabled world. One story that stuck with me was the way that James Watt and Matthew Boulton figured out how to price their steam engine. Rather than selling it outright, they went to miners (the main customer of steam engines — they needed to pump water out of their mines) and asked them how much they spent on horses, and then offered to lease them the steam engine at 1/3 the cost of all the horses the steam engine replaced. In other words, the ROI was clear and immediate. While more modern business models often promise savings, they’re not so clearly tied to what they’re replacing, which can increase the risk factor. However, it looks like one company in France is trying to bring back this sort of model. Altitude, a wireless broadband provider, is looking to provide VoIP services to businesses by charging them a flat-rate, which will be exactly one-half of the average of their previous year’s phone bills. Basically, customer can be assured that they’ll save money, since the fees will be based on what they used to pay. Of course, there are other issues to take into account, such as reliability and quality, but it’s still fascinating to see this sort of business model revived.

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