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We talked about whether executives imposed a "revenue neutral" constraint on his work. That term means that regardless of specific changes in licensing, the amount of revenue the organization receives is the same as what they receive now. Dan told me that his company uses the term "revenue agnostic" rather than "revenue neutral." But he said the concept was the same.

In addition to revenue, in my experience, executives are also concerned how the change would impact their customers. Typically executives require that any change not disturb customer satisfaction. Dan said that customer satisfaction was a concern. He said his executive was also concerned about how revenue change would affect the various parts of the organization. Dan's comment reminded me that my client had a similar concern.

So there are three constraints:

revenue neutrality
maintain customer satisfaction
maintain the satisfaction of the company's divisions

A simple and totally reasonable set of constraints? They are reasonable. But are they effective? No, in my experience, they are ineffective.

Let's construct an analogy so we can test:

Imagine that for the past thirty years you had been charged for all your home's utilities -- gas, electric, water, garbage, sewer, and so on -- by the total square footage of your home. The billing system uses a linear scale, the more the square footage of your house, the more you pay. For instance, a 2,500 square foot house pays $600 for utilities and a 5,000 square foot house pays $1,200.

After years of complaints from home owners of every size house about the inequity of the charges, the local government decides to change how they charge -- they will charge you for resource consumption. You will be charged separately for gas, electric, water and so on.

The heads of the local government impose the three constrains on the planners.

Can the planners create a new billing system that is revenue neutral? They may be able to do it for the first billing cycle, provided the customers stay in the same pattern of usage. But once most customers see measurements about resource consumption, they will change their behavior, which will change their consumption pattern. So, long-term, the planners cannot maintain revenue neutrality. Can they predict how much revenue may change? Yes, as long as they don't have to be right.

Would you, the customer, be pleased with the new system? Let's look at your neighbor, Jane, with a 2,500 square foot house. Jane did nothing to change her resource consumption and rather than receiving a bill for $600, she receives a bill for $400. Is she pleased? You bet. On the other hand, your neighbor, Stan, with another 2,500 square foot house, like Jane, doesn't change his pattern of resource consumption but he receives a bill for $800. Is he pleased? No way. There are also homeowners who aren't effected by the change. Their bill will be about the same as it was before.

Some people in the community are winners (they pay less than before). Other people are losers (they pay more than before). And some people aren't effected (they pay the same as they did before). In my experience, that's the way it always is with a change to a billing system.

Back to revenue neutrality for a moment, Stan's resource consumption was being subsidized by other rate payers. If the $200 difference is significant to Stan, he may choose to lower his resource consumption so he doesn't have to pay as much.

Any change in behavior by Stan or anyone like him will change the revenue stream. Until the pattern of resource consumption stabilizes at a new level, I don't know any way to precisely predict what the total revenue stream will be 6 months after the billing system is changed. Revenue neutrality isn't sustainable. The revenue stream will change.

Will the utility supplier organizations be pleased with the new system? Similar to the customers, some organization's will win because their revenue stream increases and other's will be losers as their revenue stream decline. Again, we will have organizations who will be winners, others who will be losers and some who aren't effected. The winners will likely be able to add employees and perhaps increase some people's pay packages. The losers will likely have to reduce the number of employees and perhaps reduce some people's pay packages.

I hope you see that it isn't always possible to create a system that satisfies what look like simple and reasonable requirements.

What can you do about the paradox? I suggest for any licensing system you decide which customers will be the winners and which will be the losers. Deciding who will win and who will lose principle holds for internal organizations. Revenue collection systems are a messy business and full of politics.

Most importantly, work with someone high enough in your organization who can make decisions rather than recommendations. Changes that impact revenue, customer satisfaction, and the power of internal organizations can only be decided by people at the top of the organization.

Finally, if you worship at the altar of revenue neutrality, you will only make tiny changes to your systems so your current state equilibrium isn't disturbed. That may be alright if only simple tweaks are required. In my experience with billing systems, that's rarely the case. The systems are preserved too long and they become so brittle they become the focus of your customers instead of your products and services.