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Recurring fees are a good thing?!?

 

Even I'm shocked these words are coming out of my mouth.  Recurring fees are a good thing?

Clearly, having lots of recurring fees and subscriptions is not a great idea, particularly in real estate, which is why I always recommend to operators and owners to minimize recurring fees.

Except in one specific category. And that category is what I call Outcomes as a service.
Let me give you an example for my world, the control industry, to explain why this is important.

Many products sold with a single, up-front charge do not receive on-going updates from the company that made them.

Historically, you would buy an extremely expensive control system and pay for it all up front. Then, the vendor would install it and completely disappear.

The result is that almost every control system that's installed in buildings today is incredibly inefficient and has never gotten better since the day it was installed.

Meaning, most buildings are wasting anywhere from 15 to 30 percent of their energy because the system was never designed to guarantee that it would deliver savings and energy efficiency.

Recurring fees align the owner's interests with the vendor's and hold the vendor accountable for performance.

Now let's contrast this to the modern controls - smart controls.

Smart controls, typically charge very little money upfront, but have a recurring fee.

If smart controls don't save energy and money, detect problems reliably every year, and deliver comfortable apartments, owners will stop paying for that smart control.


And smart controls come with 24/7 support and training so that your staff and team know exactly how to use them, even if your staff turns over every single year.

Vendors are incentivized to continuously improve the product.

But it's not just about aligning incentives and holding the vendor accountable, it's also about encouraging the vendor to continue investing in making their product better over time.

As an example, at Runwise, we've spent over $25 million making the product better over the last four years.

Every single day our 25 person engineering and software team release new updates that get distributed to thousands of buildings around the country.

Every single day, those controls save a little bit more energy, detect problems a little bit better, and make people a little bit more comfortable.

Outcomes as a Service industries like Smart Controls are not just about having smarter controls. They're about smarter payment models. The building owners and managers know they're paying for outcomes, not a product that doesn't deliver them.