Recurring Revenue

I've spent a number of years in the IT and software services market. Everywhere I've worked, there have been executives talking in frenzied tones about the holy grail of recurring revenue. In the minds those companies who haven't yet sipped that sacred solution, it almost invariably takes the form of support contracts. Occasionally a brash individual even dares to hope for training revenue.

The thing about recurring revenue (all revenue, really) is that it represents a return on investment. It doesn't come from the ether. Some decision maker took some money out of the company's pocket and put it to work somewhere. The revenue is the dividend on that investment.

Revenue happens when other people give the company money. They, likewise, are hoping to make an investment that will pay them dividends. When they pay you for a product or a service, generally it's because you or your fans have convinced them that you're going to help them kick butt in some way.

This means that when you spend money to build a product or a service offering you are--in a very real way--investing in your customers. Selling a product or service makes a statement of faith and commitment to the customer. It says,
 

We have faith that you can do awesome things, and we are confident we can build something to help you do it. We only ask that you share with us a little bit of what it earns or will earn for you.

So with that in mind, consider the company that looks past the sales and subscriptions, with dollars in their eyes, lusting for the support contracts and the training fees. What *exactly* is this company investing in?

The answer is left as an exercise for the reader.