Spreading cost of Hosted Recruitment Software

Background:
We were asked by our partner, a recruitment software house, to assist it in funding a contract with the Customer for the implementation of a software system critical to the temporary recruitment side of the customer’s temp and contract agency business. Our partner supports the customer’s recruitment business which depends critically on the software for its end-to-end contracting and temporary staffing operations. The software (before development, support and upgrades) is priced on a percentage of the sums invoiced in respect of employee hours during the year and this fee is payable monthly.

The requirement:
Behind the multi-year licence, lay many hours of coding and R&D and our partner needed to recover these costs with a sale.

The customer, on the other hand, wanted the benefit of pahying quarterly over 3 years, to match its employment contract revenues.

The solution:
Our software partner agreed quarterly instalments with the cutomer in the payment schedule to its licence. AFM Solutions re-drafted some of the licence terms and, in agreement with the customer, purchased these instalments, paying the net present value of £381,000 to the software house.

The benefit to the customer:
The customer did not want to pay in advance for the software, having a deferred revenue model, and insisted on a quarterly fee, thereby matching revenues with costs. It would not have been comfortable with an initial cash payment to our software partner but was happy to agree to a fixed irrevocable licence fee payment

The benefit to our software partner:
Our partner has a good relationship with the customer and the customer has trust in the software and a good understanding of its contribution to the cost management and efficiency of its temp businesses; the customer was more than happy to allow our partner to fix the minimum payments in its licence and enable a cash payment to be made by us