You’re Getting Ripped Off.

But let’s back up.

THE REVELATOR recently explained Why He’s Done Tracking Gartner (spoiler: they are simply not designed to solve the problem of implementation success in the AI era), and in the post he made two key observations:

1) “Subscription revenue continues regardless of outcome. Predictions expire and are replaced. There are no consequences for failure.”

In other words, they are dangling outcomes, but not doing anything to ensure you get them, and because they are never to blame, the subscription revenue continues. However, it’s only fair to point out that this is NOT unique to Gartner! It’s the Big Analyst Firm Model. It’s why the doctor doesn’t work for Big Analyst Firms (because they refuse to update their methodologies which are decades out of date and hinder more than they help), and why I worked for Spend Matters for years until the buyout (by a PE firm that, frankly, almost destroyed it as they completely stopped all innovation) and why the doctor deeply respects boutique firms like HFS Research because they keep trying to modernize their offerings to provide real value and guide clients to real results.

2) “What scales in this industry is engagement—not outcomes.”

And this is dead-on. The rhetoric is being thrown around by way too many services(-adjacent) firms (who want to charge based on it) and software firms (who won’t charge based on it). And all of it is usually to mislead you on what you should be getting and what you should be paying!

Here’s the reality you’re not being told when they want to, or refuse to, price on outcomes.

1) If a services firm wants to charge based only outcomes, it’s because it expects to make way more money that way. It’s common in audit recovery, contract re-negotiation, and SaaS consolidation because these expert firms know just how much you are overpaying if you’ve never done these efforts before. They also know that they can use cheap software and benchmarks and experience to quickly find the savings you can’t, and make big bucks off of you by charging on outcomes (and not effort and/or software).

2) If a services-as-software firm wants to charge based on outcomes, especially an “Agentic AI” powered one, it’s because their true costs are higher than they let on (due to hefty Gen-AI compute costs) and they aren’t viable offering a classic subscription-based service model.

3) If a software firm refuses to price in (a hybrid cost model based on) outcomes, it’s because they know you won’t get those outcomes unless they (as a firm) put in a lot of work training, guiding, and helping you achieve those outcomes. When their model is “install and backhaul” (out of there) until renewal time (because if they don’t hit their unattainable PE-defined sales numbers, they will be told to hit the road, so they have to spend all their time on sales).

The reality is “outcome-based pricing” only encourages success when done right — and done right is done in a manner that encourages, as THE REVELATOR notes, engagement-focussed.

That’s why, in our post on why you should STOP PAYING PROCURETECH/FINTECH ADVISORIES A DOLLAR JUST TO LOSE THREE DOLLARS!, we told you this is how you should negotiate, and pay for, software and services when “outcomes” are involved:

1. For software, you will pay a base annual fee for the platform that will cover 150% of their base hosting costs, so they won’t lose, and then a percentage of transactions, identified savings through sourcing events, contract value, etc. where the percentage is calculated such that if you save 100% of their promised savings, they will make 50% more than what you would pay on a fixed cost after negotiation -— if they are so confident in their claims, this should be a no-brainer for them. (But if they won’t agree to this, it should tell you what ROI you can actually expect!)

2. For GPO agreements, you will pay a fixed amount on each transaction, calculated based upon the expected savings before you sign the contract, and if they can deliver the savings, you will definitely be using them regularly —- and, as with the Tech Provider — you will calculate this so that they win bigger than if you pay them a fixed cost IF they generate a return for you!

3. For services (outsourcing), you will pay a fixed rate per hour that is enough to cover the assigned personnel cost (their salary plus 30% overhead), and any compensation beyond that will be dependent on the department delivering an ROI beyond a certain amount (which is the amount required to cover the basic fee you are paying them); and again, you’ll fix the compensation such that if they deliver 100% or more of what they promise, they will win big too. (And if they deliver less, while their costs will be covered, their profit will be next to 0.)