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Jeff Fehrman – Why Pricing Discovery is Not Much Different than the Billable Hour

Welcome to an Expert series podcast featuring our former colleague and head of our eDiscovery and document review business, John Reikes.

A Race to the Bottom

Welcome to an Expert series podcast featuring our former colleague and head of our eDiscovery and document review business, John Reikes.  John is now the CEO of High Impact, a studio which specializes in litigation-related graphics.  On this podcast, John talks with eDiscovery leader Jeff Fehrman, Vice President at Reveal Brainspace.   Jeff and John discuss eDiscovery pricing, flipping the funnel on document review and partnership.

  • [00:53] – John sets the stage for our conversation, noting a misalignment between how we pay for discovery services and how people value what they’ve received.
  • [02:37] – If we measure value in risk and people time, why price it by the gigabyte?
  • [04:31] – The number of hours an attorney spends on a matter does not align with the value they’ve brought to it.
  • [06:29] – Hosting gigabytes are not relevant to either party, so why are we using them?
  • [08:13] – Any additional ancillary value, whether artificial intelligence or applying translation, should be wrapped into one common price.
  • [11:37] – Charge per doc, that’s plain and simple.
  • [16:08] – Can we expect success moving to a similar model on the data side of eDiscovery?
  • [19:10] – To charge or not to charge for hosting – it comes down to value.
  • [23:20] – AI drives automation and efficiency and can flip the pyramid – you get the documents you need and set aside the others.
  • [27:02] – Advice to buyers and sellers? Commit to a partnership.

Enjoy!

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Podcast Transcript

Note: This transcript has been adjusted to improve readability. Transcripts are generated using speech recognition software and human transcribers. The context and more than 95% of the actual transcript have been preserved.  We strongly encourage our listeners to listen to the audio.

 

Nicole Giantonio: Hello, this is Nicole Giantonio, the Head of Global Marketing at Elevate.  The podcast episode you’re about to hear is part of our expert series, featuring our former colleague and head of our eDiscovery and Document Review business, John Reikes. John is now the CEO of a full-service litigation support firm, High Impact.  John talks with eDiscovery leader Jeff Fehrman, Vice President at Reveal Brainspace. Jeff and John discuss eDiscovery pricing, flipping the funnel on document review and partnership.

John Reikes: Jeff Fehrman, thank you for joining.  Why don’t you give a quick intro of yourself?

Jeff Fehrman: Jeff Fehrman, Vice President with Reveal, spent the past 19 plus years in the eDiscovery space, had the privilege of working with you, many, many moons ago.

JR: Indeed, indeed, it has been more moons ago than I think either of us can believe.  Thanks for taking the time to join me and talk about the wonderful world of discovery pricing; I’m sure, a hot topic for many of our listeners.  So why don’t I tee us up and give a little background on how I’ve been thinking about this and why I thought you and I might have a discussion here.  I have a few people who’ve heard me say that I feel there’s a drastic misalignment between how we pay for discovery services and how people view the value that they’ve received.

And whenever you have that disconnect between what you pay and what you see value in, that tends to lead to bad feelings and bad profitability.  So the example I often give is, imagine you went to a car dealership and somebody said, “I’ve got this wonderful luxury car and fully loaded it has a sticker price of $80,000.  I’m going to sell it to you for $10,000, and there’s a catch, and I don’t want anybody to come back later and say, I hid something from you, you have to buy the gas from me forever.  It’s 12 bucks a gallon, and it’s much more expensive than any other gas pump you’re going to go to.”

“I want you to take a calculator, figure out how many miles you’re going to drive, here’s how many miles per gallon it gets.  I think this is a good deal.  Even with that pricing, I think it’s much cheaper than if you were to buy it somewhere else, but I don’t want you to come back to me pissed off in a couple of months because the gas is expensive.  I want you to know that today.”

You might very well get your calculator out and figure out what your cost of ownership will be.  And I bet you you’d find out that’s going to be a very low cost of ownership; this is probably a fantastic deal in terms of the total number of dollars you will spend owning that car.  But how many months do you think you will pay $12 a gallon to buy gas from that dealer before you’re going to feel pissed off looking across the street at normal gas prices?

JF: Not very long.

JR: Not very long is right.  I feel like that’s what we’ve gotten ourselves into in the discovery world.  We charge people based on gigabytes.  We used to do all kinds of things by the page, I don’t see too much of that anymore, and yet, I don’t think there are too many buyers, especially when you go back to a corporate legal department buyer for whom the gigabytes have value.  It’s not a number that ties to anything for them.  The case has a certain risk value or dollar value assigned to it, certainly people’s time they can assess, but a gigabyte, not so much.  Yet, that’s driven a lot of pricing.  So what are your thoughts, first off, just on that premise?

JF: It’s the age-old thing, right?  It’s what’s the common metric that you can measure to price something, and it’s probably not much different than the billable hour within a law firm, which everybody says is going to go away, right?  I find it the same as insourcing versus outsourcing.  The pendulum swings back and forth every three to five years, and the billable hour has not gone away.  I actually see documents still being printed off of a printer, so the paper is not going away.  But when it comes to discovery, I think it’s the common thing to be able to price on.

With that being said, there’s a couple of ways to look at pricing discovery, right?  For somebody sitting on my side as a software provider in a SaaS environment, it’s a very easy metric.  You’re going to pay per gig, and it makes sense.

On the services side, I think it’s a race to the bottom.  People will price things low to win a job or win a client without any additional value being placed there.  When corporations look at this, especially some of those that don’t deal with us regularly, they look at, they put a spreadsheet together, they put together provider one, provider two, provider three, and it becomes all about cost.  Maybe they don’t go with the lowest cost, but they’re definitely not going with the highest cost.  I don’t know that they’re thinking about value.  The value that they’re getting.

JR: I think that’s right.  And you brought up the billable hour and the spreadsheets, and I think that starts to highlight where we have struggled to move the ball.  When it comes to the billable hour, everyone agrees.  How many hours my attorney spends on the case is not a great metric to measure how much value they have brought to it.  Certainly, many conspiracy theorists, who are not all that crazy, have thought that perhaps somebody who’s billing by the hour is not as incentivised to work as efficiently as somebody who’s not.

But then everybody says, “Okay, yes, we should get away from the billable hour,” and then they issue the spreadsheet when they do their RFP, and what is the column sorted by?  It’s sorted by the billable rate per hour, and the same thing happens in the discovery world, everybody says, “Oh, yeah, I don’t want the standard pricing, I want to think outside the box.” However, I have a spreadsheet, and there’s a box, and I’m going to make it fit into exactly that box that I just said I want to think outside of, and all the other stuff goes away.  I joke that we price the way we do, because our fathers and their fathers before them did it, and it’s a little bit of madness that we can’t seem to get out of.

JF: I don’t disagree.  Thinking back to probably even eight or nine years ago, I had a data analyst consulting practice.  We would try and sell,  “…if you spend an extra 20 hours upfront on a case, we will save you a significant amount of money on the back end, by starting to get to the heart of the matter, weeding out some of the stuff that’s not necessarily relevant.”, and then I had the privilege of doing a webinar a month or two ago with two industry experts, both still pitching the exact same thing, and they said it’s hard for them, even with their corporate clients.  One was on a provider side; one was in a law firm.  He said, “Look, we will sit down with you.  You’re going to spend a little more money upfront, we’re telling you that right now, but we are going to save you a significant amount on the back end of your discovery,” and still, to this day, I think it’s a challenge to get somebody to buy into that.  “It’s a rush to review, and we want you to process the data as quickly as possible, run some search terms, and get it into review.”

JR: What I think is an unusual nuance of the pricing and discovery, in particular, there are a lot of areas where at least when you think about even hourly billing, somebody who is buying services in an hourly model, is perhaps buying on a metric that is not relevant to the value that they receive.   For the person selling it, it is at least relevant to them, “I only have so many hours per day, and if you’re going to take up X number of them…” That is a very relevant metric to me as a seller.  It’s not a very customer-focused way of pricing, but as a seller, the rate is at least is rational.

Gigabytes have always been unusual because they’re actually not relevant to anybody.  Look at your software environment now, and I think you agree that gigabyte hosting charges are not a major driver of your costs for your business.  Software development is a major cost, having corporate overhead, sales, marketing, and other things.  There are a number of things that are relevant to you, with, of course, development being the obvious one.  The hosted gigabytes really aren’t so much.  And so we have this proxy that we’re using that’s irrelevant to both parties.

JF: If you look at it in a snapshot, I can’t disagree with you.  The one thing I would say is a lot of people are going to charge you for hosting.  They’re going to charge you for user licenses.  They’re going to charge you for analytics.  They’re going to charge you for a lot of other things.  So what we’ve done, and it’s yet to be proven whether we’re right or wrong, our common metric is pure gigabytes.  We said you shouldn’t have to pay for users.  Users shouldn’t drive how many licenses you need.  At the end of the day, we want to provide a platform where you could have one user.  You could have 500 users, which isn’t something you should be necessarily charged for to us.

The second piece is any additional ancillary value you bring within your platform, whether it’s artificial intelligence, applying translation, transcription, or any of that stuff, that should all be wrapped into one common price.  I think the problem is that if you look at a per-gigabyte by itself, it may not make sense.  However, suppose you tie everything into it and tell somebody.  In that case, this is going to be your single line item.  It’s easier for the consumer to understand and for somebody like yourself or somebody at an advisory firm to explain.  “Okay, we now wrap our services around that,  and there’s value in our services.” But it doesn’t make sense when you’ve got 15 different line items you’re charging for, especially on the software side.

JR: I think you’re getting into an important topic here, which is putting aside whether or not it’s the closest analogue to value.  It’s at least easy to understand.  We sometimes use this term internally, de-complexifying.  It de-complexifies the price sheet.  I think that’s a worthwhile effort.  It’s interesting, any time you deal with somebody new to the discovery world, they look at eDiscovery platforms price sheet for the first time, and by “new to it”, I mean anyone who’s been in it for less than five years, they look at the price sheet and their head kind of explodes.  And when they put together an estimate.  They get it massively wrong.  They don’t even understand it on the first try.  What we’ve done to at least simplify it is moving us in the right direction.

In my time at Elevate, I thought if we move to a different metric as our key to everything, and I focus for a while on a per-document price model, which we tested in the market.  And I’ll be honest.  It wasn’t very successful.  Keeping in mind, we’re value-added resellers, we have the platforms that we leverage, and we’ve also got our project managers who are part of that value-added piece of the puzzle, and then we’ve got our doc reviewers.

So we said, “Okay, we want to make sure we are rewarded when we do what benefits our buyers, and we want to make sure we’re not being rewarded when we don’t do that.  How should we go about it?” So we tried a price model where we priced everything by the document, and effectively there was an incentive to us for documents that got called out and didn’t need to go to review.  That increased our profits and helped bring the overall total bill for the customer down in those situations.  But where we had to review, we didn’t go underwater.  We became minimally profitable the more review we needed to do.

And so we had an unusual take on that, and the only way that was going to work was if we could get people to come to us from the beginning of a case and partner for the full discovery and doc review process.  We thought that was a pretty straightforward message, we thought that would work, and it was interesting how the only people who ever really engaged in the conversation said, “Oh great, what I’m going to do is cull my documents down before I bring them to you, and then I’m going to get that really punitive rate that you’ve applied for the review, and I’m going just to have you review the stuff I’ve already culled, and I’m not going to collaborate with you on how to bring that volume down.” And we said, “This was the only thing that was in the fine print, and that’s a no-go, that doesn’t qualify as partnering with us.” Long story short, it didn’t work, despite our best effort.  I don’t know that we’ve ever cracked that code, but I still think that the per document metric might be key to better aligning people’s perception with what they get.  What are your thoughts on that?

JF: If we look at it, especially from a review context,? Where I think it should be an easy sell is in review.  If you’re going to talk about per hour, and then you’ve got some people who put a standard at 50 docs per hour, 60 docs per hour, whatever it is.  They’re going to do an analysis or provide an estimate based on the 100,000 docs they have to review or a million docs they have to review.  They’re going to say, “Okay, divided by X, it’s going to be X amount of hours,” well, what they didn’t take into consideration, there may be files that are 40 pages long, and now your docs per hour are down to 30.  So the bill is twice as much as they thought, right?  And so what you end up with is one irritated client who then tends to string out what they’re going to pay when they’re going to pay, and then they start negotiating.  At the end of the day, you know as well as I do, it’s very heavy labour arbitrage, and you’re right.  The margins have gotten smaller and smaller and smaller.  I can think back to when we were charging $95 an hour.

It wasn’t that long ago.  I think about per doc, a doc is another thing you can measure, so if I’m going to charge you per doc and you know you’ve got a million docs, it will cost you a million dollars for this review.  That’s plain and simple.  If I get it done in two weeks, or if I get it done in six months, it shouldn’t necessarily matter to you.  I shouldn’t be penalised for the advanced analytics that I’m using and the extremely smart people I have.  At the end of the day, you’re incentivised to do it as quickly as you can, efficiently.  And if you don’t, you will eat into your margin, and in some worst-case scenarios, you may even lose on a project.  It makes sense to me.

I’m more interested in understanding where the challenges were for you and your team at Elevate as you talk to Corporation A, B, C.  It should be an easy thing.  What you’re providing is predictability, and that’s something that the last 10-plus years, that’s all people have asked for, we want predictability.  I don’t mind if I spend a little more.  I just want to know what I’m going to pay.

JR: It’s interesting you bring up the per document, doc review pricing because that’s something that has become more and more standard in what we’ve sold.  We’ll call it about half of our projects sold on a per-document basis instead of hourly.  Interestingly, everybody always asks you at the front end to estimate what it would be if you do it hourly and give an estimate for what it would be if you do it per document.  They don’t realise that the front-end estimate for the per document model will always be a little bit higher than the front-end estimate for hourly because you’re buying an insurance policy from us.  That’s what you’re buying.

Is that what we’re saying?  We think it will cost us X number of dollars to do this review.  Still, because we’re going to guarantee you that rate, we’re going to charge you a little bit of a premium on top of that, and as long as we can adhere to what we said, we get to keep that premium, and if we don’t, we own the risk.  You never do a doc review project on a per-document basis, and you never have complaints after the fact.

Sometimes, you do it hourly because they say, “Oh, you thought it was going to cost X and all the things you just said happened.  You ended up giving us a million spreadsheets, you changed the coding template on us a bunch of times, all these things changed in the course of the review, and you said you wanted to pay by the hour.” That’s life.  You didn’t buy the insurance policy.  But so many people ask to see both, they’re surprised that the per document on the front end has a higher estimate, which I can’t imagine why you’d be surprised.  Of course, that’s how this works, it’s not magic, and then they’re upset afterwards when they choose hourly, and it ends up costing more.

JF: And to your point, the funny thing I remember back in the day, and I don’t know that this happens anymore, people will say, “Alright, show me the hourly, show me the per doc, and then I wanna pay on whichever is lower at the end.” No, it’s like, do you want to pay for travel insurance or not?  You may pay a little more for travel insurance, but guess what, that’s going to protect you if anything happens.  If you don’t buy travel insurance, then none of this stuff will be covered when things go awry.

Not necessarily germane to this discussion.  But we’re renovating our garage, and the guy came in the other day.  He said, “Okay, here’s the floor, and here are the walls we’re doing.  And this is your price.” I looked at him and thought, that fits within my budget.  I looked at the guy and said, “that works for me.  At the end of the day, I want to get a good price, but I also want you to make money.  I’m not going to stand here and argue for an hour and try to beat you down, and beat you down and beat you down when you’re now less incentivised to do a great job on my garage.”

And so I think that’s the problem.  You find some great buyers.  They’re partners.  They say, “We love your service, and we’re willing to pay you a premium.” Then you have other people who don’t care and are going to beat you up and beat you up and beat you up, and then those are the difficult clients.  They pay the least, and they ultimately cause you the biggest problems, or at least that’s what I’ve seen.

JR: Given that there’s been some success in moving people to a per document model on the review side.  Do you think there would be success moving people to a similar model on the data side of eDiscovery?

JF: I guess the question is, is a doc a doc, or we just keep running up against the spreadsheet problem, so if I’ve got a million documents and they’re one-page documents, and company B over here has a million documents that are all 40-page PDFs. Now, we have to think about pages per doc.  Are there other things that we’re not necessarily thinking about when you quantify it as simple as a document?  Because not every document is the same

JR: I think we’d run into more of that problem on the doc review side than I think we would run into it if we switched our model over to a per document rate on eDiscovery services.  Which, by the way, it’s something we had considered.  That this might be something that we as a service provider would do and own the risk as an intermediary to you.

We considered, okay, with our software partners, they’re going to price the way they price to us, but part of what we need is to translate that pricing into what matters to our buyers, what brings value to them.  And so we had started to look at how we might make that conversion, take on that risk.  And to the extent that somebody’s data is different, and it turns out that it blows up the per-gigabyte cost, owning that risk is, that’s just part of our business.  We have enough data to see the trends, we know our average document count per gigabyte, and if we get one buyer case, so be it.  Honestly, it’s the document review labour where you’ve got a lot more risk in making those kinds of gambles.  You can bleed money extremely quickly if you’re a service provider making that gamble.

JF: If you’re looking at it on a per doc level, it’s about 10,000 docs per gig.  And we’ve been turning around 3,000.  You go from 10,000 down to 3,000.  If you look at that, and you divide it.  Let’s just say $25 a gig is what you’re charging.  Now you’re looking at 0.008 cents per doc.  Now I’m going to ask you a difficult question.  What’s the difference between that and charging $25 per gig?

JR: It goes back to my car analogy at the beginning, and dollars spent.  Let’s align to what somebody sees as valuable.  If you’re an attorney working on a case and you might have started as a young associate reviewing paper documents in a warehouse, a document is a thing in your head much more than a gigabyte.  I think that a document, whether it’s large or small, is a more salient item than a gigabyte.  Just because this one file happened to have a whole bunch of data at the end of it, and you’re paying by the gigabyte, it’s largely useless and meaningless to your case.  I tend to find a unit, at least in my head, aligns more to the value.

I’ll be the first to say.  I still don’t think it’s a great proxy.  It still doesn’t get to the value of your case because you could absolutely have a case that’s soaking wet worth $20,000, but it happens to have a terabyte of data associated with it.  You’re going to end up with millions of documents, and it’s still going to blow everything out of whack, but I don’t think we’re going to get to the point where we can necessarily tie the discovery costs to the dollar value of the case.  And as anybody in the legal world knows, the dollar value of the case is 80% of what everyone’s arguing about anyway.  There’s never any agreement on what that really is.

JF: If you think about this, is that a one-time per doc charge or a monthly per doc charge because you’re still storing and hosting that information, right?

JR: It’s an interesting question.  We had looked at both and have considered whether it’s worthwhile.  The problem I think we would run into as a service provider is that if we simply charge a single fee, a one-time fee for it, and don’t charge any hosting, you risk that people start using you as an archive.  And, while I have no problem with it, except that our costs are usually tied to the hosting through software providers like yourself, I’m not pointing fingers here or blaming you.  Still, eventually, the business model can blow up on you if somebody goes too far with it.  They have a bit too much ability to blow up the business model.  If you do it on a monthly basis, I think it de-risks it enough for a provider like us that we can own whatever risk remains in that equation, even though I think, in a perfect world, my preference would be that it was just a one-time fee.

JF: As I think about this, I think about Dropbox, and I think about other things that I use to store documents, all of them still charge by the gigabyte and terabyte, right?

JR: They do, but that gets to; I’m sure you’ve heard this comment.  The per-gigabyte charges with the new Discovery platform are orders of magnitude greater than the per-gigabyte charges from AWS or Dropbox or any of those services.  I think that gets right at the heart of it.  The misalignment of value is that people have a tendency when we’re billing on the gigabyte is to say, “Well, the only other thing I pay for by the gigabyte is my Dropbox account.  And it’s a hell of a lot cheaper.” That’s part of where I see this mismatch that we’ve got to address.

JF: Yes, I think back to hourly, right?  Somebody will say, “Well, you’re paying this person X amount per hour, but you’re marking them up 500%.”  “We’ve got hundreds of employees, we’ve got 27,000 square feet of beautiful new headquarters in Chicago, all of that, the executives, the marketing, the accounting, the sales, the ops, the R&D, all of that is tied into that per gig fee.”

JR: You’re kind of making my point, though.  I agree with you on the costs.  I suppose what I’m getting at here is.  I don’t think anybody’s bills are too high right now.  I don’t think your bill to us is too high, I don’t think our bills to our customers have been too high.  We have costs as businesses that we have to recoup, but we are perhaps billing on a metric that just doesn’t taste right to people, and that comes back.

So what would be the right answer?  We can all look at what our costs are.  I can look at our project management team and say that instead of billing people by the hour, I’m going to bill by how many cups of coffee our project manager has to drink while working on your project.   And it’s not like I couldn’t figure out how much a person’s salary cost over the time they spent working on that project.  How many cups of coffee is the number I will divide by and get to the answer.  It would be a silly metric.  It’s a silly proxy.  I’m not saying the gigabyte is entirely silly.  I’m just saying I am aligned with you, that as a business, we are operating at a different scale than AWS.  You are not warehousing data in the sort of world that they are.

I’m actually making the case that I think you are unfairly judged if you are trying to price in the same model as an AWS where all they’re doing is hosting data.  It’s not that Amazon doesn’t have tremendous overhead, but Amazon also has tremendous scale in the markets they are addressing, whereas you are in a much smaller market.  You’d still have quite a bit of overhead that needs to be recovered.  And the question is, what else can we do to make people see that?

JF: I still think the focus is on the wrong area, whether it’s a gigabyte or per doc.  I think part of our pitch is AI Everywhere. To drive automation and efficiency for our clients, they get the information that matters at the right time, where they can save money, settle a case, or decide to move forward with a case.  All along, it’s been, “Let’s just throw the gigabytes in, throw the gigabytes in.”

Maybe we’re asking the wrong question, where’s the value in this e-discovery paradigm?  The Microsoft GC years ago flipped that pyramid.  The pyramid today is a funnel, it’s a funnel where data comes in, and it gets a reduction with keywords and data restriction and duplication.  It then gets a further reduction here and a further reduction there.  And then we find out 20% of your data is moving into review, and of the 20% of that data, how much of it are you actually producing, how much of it actually gets produced?  So the goal is to flip that pyramid and get you to the documents you’re going to produce early on so that you don’t have to necessarily worry about the rest of that data.

And when I say, don’t worry about it.  I’m saying that you can limit the amount of doc review that you have to do.  That’s where I think there should be more value in the Elevate’s of the world and their review teams.  You can have smaller review teams that are focused on getting to the information that matters, and that’s the value you can bring.  And that’s how I think you get to an alternative fee arrangement.  You get to something where you have a little skin in the game, and they have a little skin in the game.  And you should be rewarded for being more efficient.  And I don’t know today that you guys are actually rewarded for being more efficient in what you do.

JR: Occasionally, but not as often as I’d like to see it.  You’re right.  You’re getting at my goal as a business head, “How can I align what somebody’s paying to when we really bring value?” If we’re hitting singles, we should get paid less than when we’re hitting home runs.

JF: If I’m going to charge you $300 an hour for my service, and I get you the results in two hours, that’s $600, versus you paying somebody $100 an hour, but it takes him 10 hours.  I was more efficient in getting you the exact results or better results in a shorter timeframe, so I shouldn’t necessarily be penalised for that, right?

I think it’s the same thing in what we’re talking about, and we could say, let’s get away from the gigabyte if you can do it if you can get people around it and write it, and there’s a way that it makes sense.  I would all be for something that shakes things up.  Unfortunately, I think today, tomorrow, in 2022, 2023, it will be gigabyte pricing.  I don’t even know that it’s the pricing per gig.  That’s the issue.  I think it’s pricing.  Where’s the value is?  If it’s just as many gigs, you can change that.  If it is the lowest per bit, they’re like, “Oh, it’s only $8 a gig to host a… Or it’s $2 a gig to host.”

If I’m going to throw ten terabytes over, and there’s no incentive on the client to be thoughtful in how they’re collecting that information, how they’re turning it over to you.  I think when prices, unfortunately, are a little higher.  If you get people to think a little more, knowing that you said earlier that you spend time trying to articulate to the clients the value when at the end of the day, they’re going to put you in a box, and they’re going to compare you.   It’s what we’ve come up against, whether it’s Reveal versus RelativityOne. Everybody’s got different mechanisms for how they are built, and do you know how hard it is for even software providers to articulate the value in their software.  I told you earlier.  We’re going to give you one line item, yet somebody’s going to say, “Well, RelOne’s cheaper on their hosting.” No, no.

They’re cheaper on their hosting, yet they’re going to charge you for users, and they’re going to charge you a potential repository fee and another fee.  When you add those other fees in, it’s not as cheap as you thought, but they’re only looking at hosting versus hosting, not necessarily the other four, five-line items.  I’m sure you guys run into the same thing.  You can’t necessarily articulate the value of Elevate in a spreadsheet.

JR: That’s right.  How do we tell people to go forward from here?  And I suppose we just need buyers and sellers in this market to all really commit to a partnership, to really work with whoever you’re negotiating with, to figure out what are they really bringing to the table, what do they need out of that deal, and that applies regardless of whether you are buying services or selling services.  It’s figuring out what the other side needs for this to make sense for them.   Any good business deal, in my view, should be one where both sides would be perfectly happy with the outcome if everybody knew, through full transparency, what the other side’s profit was in that deal.  That’s kind of the hallmark of a good deal if you’re selling me an apple, and I know you grow apples, I know it didn’t cost you anything.  Still, I also know how long it took you to grow the apples.  When I pay you a dollar, I know you didn’t pay anything for the apple, I know that you worked hard to grow the trees, etcetera.  And so with that sort of transparency, I am happy to pay you that money, and you’re happy to receive it.  Everybody should genuinely engage in that discourse and figure out what you are trying to accomplish and what your business partner needs to make happen.  What are your thoughts on that?

JF: And there’s a couple of things you said.  The first is, where do we go from here?  For those who are listening to this, let’s continue to think about it.  It doesn’t have to stop with this podcast.  Have thoughtful conversations.  Are there other ways that we can think about this?  Other ways that we’re not looking at this today, because we’ve had tunnel-vision on how we’re going to price things.  Be open, be a partner.   I gave you the analogy with my garage.  It’s the same way when I buy a car.

Buying a car is the most painful process for a lot of people.  I don’t want to sit in a dealership for eight hours and have somebody come back and forth and back and forth and back and forth to get to a price.  I typically say, “Look, here’s what I’m willing to pay.  I want you to make a profit.”   At the end of the day, that salesperson’s getting paid for the sale of that vehicle.  The finance manager is getting paid on whether he can sell you a warranty over some under-carriage.  I don’t mind that, I just don’t want to get completely railroaded when buying a car, but I also don’t want to sit there for eight hours.

You want to have partners.  I’m fortunate.  I would say that 90% of the clients I work with are true partners.  It’s why I enjoy working with them.  I have had long relationships with them.  People who are coming in and purely focused on the lowest price they can get, it’s just not necessarily the conversation I want to have with somebody, and they probably need to go somewhere else.  I would think that you may say the same thing from an Elevate standpoint.  You’re not necessarily wanting to work with people who want the lowest price every time.

JR: We’ve focused a lot on the importance of genuinely partnering and making sure that we’re all working together.

JF: And what’s that worth from a price standpoint?

JR: We’ve never tried to be either the lowest cost provider or a premium price provider.  Our approach to pricing has always been that we need a fair price, and we want people to work with us.  We should not feel embarrassed if someone were to see exactly how much money we made on a deal.  We want that to be something they can look at and go, yeah, that’s fair.

JF: I think that’s how it should be.

JR: Parting thoughts, other than it sounds like we agree that everybody needs to be more careful about using the spreadsheet blindingly, anything else you have to say?

JF: I think folks should continue to have thoughtful discussions around things like this and consider other ways that we could potentially price.  I think a lot of people are open to it.  I just know that it’s difficult to change as well as you do, and as much as people say, “Wow, there may be a better way,” it’s always easier to resort to what they’re comfortable.

JR: Jeff, thank you so much for joining us.  It’s been a pleasure having you here today and working with you over the last decade and a half.

JF: John, I greatly appreciate you inviting me to take part in this today, and as was always, it’s a pleasure.

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