I listened to an interview this week in which an entrepreneur who recently sold his advertising agency shared an interesting insight. He thinks that a new wave is being ushered in for software companies and agencies. His premise is that B2B software is a tool that a customer buys in hopes of achieving an outcome. True value is created by the company that’s willing to be accountable for an outcome. Software doesn’t make that happen; it’s up to the customer to figure out how to use the software tool to get the outcome.

This entrepreneur believes that companies don’t want to pay for tools. They want to pay for results. Right now, the result is detached from their spending. More companies are wising up and saying they want to pay for the result, not the tool. They don’t care how it’s done; they just want the result.

He goes on to explain that when you buy software, you often must hire an employee to use the software to create the result you want. And the other way around: If you hire an employee, you must buy the software that empowers them to get the result you want. He believes that the future is software-enabled agencies. The agency hires the person and buys the software, which work together to get companies the result they want at a lower price than they could achieve on their own and with a higher level of execution because they do this all day across a broader base of companies. The software-enabled agency allows the company to pay for results at a lower cost than if they did it internally.

Now this is where it gets interesting. He goes on to make the case that some software companies will become agencies. These companies will do the work for their clients and focus on delivering results. They’ll use the software they’ve built (and that they’re super users of) to achieve results for their clients in a scalable and efficient manner. The rationale is that some companies don’t know how to use the software tool, so they’re not getting the desired result, which leads them to cancel the software subscription. If these software companies start selling services focused on outcomes, they can retain and attract more customers because their customers are paying for results, not tools.

This is a fascinating take on things that I’m thinking about more. I’m going to chat about this with my friends who are software entrepreneurs.

The interview discusses this concept in much more detail and touches on lots of other great stuff. Anyone interested in this section of the interview can listen or watch here.