Is the Hourly Model Broken?

I can’t speak for James, but when he and I founded RedMonk six years ago come November (crazy, isn’t it?), I for one did not anticipate what we’ve become today. I didn’t even try, to be honest. My belief was that as most successful ventures will, RedMonk would evolve according to the rules of natural selection; in this case the needs of the market, our customers, and our competition.

Because there was always this: if we didn’t adapt, there was no point in worrying – we wouldn’t suffer that long.

But one thing we were jointly committed to from the first day was a rethinking of the traditional analyst model. We had – and still have, for the most part – significant philosophical differences with the models that preceded our own. The notion of “seats,” for example, was something we viewed as unnecessary friction and a barrier to entry. Obviously we had big problems with commissioned content, but even the way that the rights to publications were sold after the fact – web rights were one fee, print another, and so on – rubbed us the wrong way.

One problem we have yet to solve, however, and I don’t believe this is unique to our industry is the issue of hours. We, like many in our industry, work according to an hourly model. In theory, whenever you’re working with us, we put you on the clock, dock hours from your contract, and if you run out you can simply purchase more.

In practice, however, this model has issues.

• It doesn’t reflect the way that we work:
  In a few ways. Generally, our client (and even non-client, to some extent) briefings include substantial feedback, reaction, and analysis. And yet we cannot typically “bill” for this value because it has been scheduled as a briefing rather than a consult. So we can either a.) withhold all useful feedback from our nice paying client, saving it for a scheduled follow-up call, or b.) deliver the feedback in the most convenient form possible – the call we’re already on – and trust that the value is understood and will be rewarded.

  Also much of the work that we do for our clients is non-consultative in nature. Whether that’s offline community interactions, event attendance and feedback, product testing and usage, client networking or any of the dozens of other behind the scenes services we perform on behalf of clients, these are not accounted for under an hourly model. Because…

• It doesn’t handle (well) micro-interactions:
  The hourly model, venerable as it may be, does little to account for interactions like the emailed request for an immediate strategic response to a new threat that we received last Friday. Given that our priority is servicing our customers, we enjoy responding to these types of ad hoc, low friction inquiries. But they are not, typically, accounted for in an hourly model. Leaving us have two real choices: trust that customers perceive and appreciate that benefit (which, often, they do), or move to a legal-style billing-by-the-minute. Which brings us to.
• It imposes an accounting overhead on both parties:
  One of the banes of my existence, before we brought the inestimable Marcia on board to help, was documenting, tracking and accounting for all of the analyst hours consumed. It’s a tedious, mind-numbing task with little obvious reward. And yet, because it’s the way that most analyst models work, it’s a real necessity. Neither side, in my experience – analyst nor customer – appreciates this chore. But both sides dutifully perform it in the hopes of documenting for accounting purposes, if nothing else, what precisely was done with those hours. And speaking of what was done with the hours…
• It imposes a barrier to entry for interactions:
  This, frankly, is my biggest issue with the hourly model: it’s a massive barrier to entry. We frequently have employees within end user customers that would like to leverage hours that are available to them per the terms of a RedMonk subscription, but either are intimidated by the prospect of reducing the number of available hours even slightly (the hoarding problem) or uninterested in the occasionally cumbersome process of procuring hours (the process problem). This typically results in one of three outcomes: 1.) the original request is dropped and/or forgotten, 2.) a “briefing” is scheduled in which our “feedback” is heavily and actively solicited, or 3.) a back channel inquiry is made.

These are far from the only problems I have with the analyst hourly model, but the most obvious from my perspective.

Common courtesy would seem to demand that after presenting a list of problems, some ideas regarding potential solutions would also be put forth. But the superior achievable model is non-obvious to me.

Consider the difficulties of a non-hourly model such as a (virtually) unlimited subscription. In removing barriers to entry, it might do so so effectively that clients gorged on hours, unbalancing their consumption and our ability to service them and other clients. Plus, the complete absence of documentation is probably not a great idea.

Answers, then, I don’t have for you. It’s something that we continue to try to evolve and improve internally at RedMonk, but there may be aspects of the model that we are quite unable to resolve. But should any of you – and we have folks from the customer, analsyst, and analyst relations areas in the audience, I’m sure – have opinions or suggestions on how we could address some of the mentioned issues, we’d be all ears.