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The "in" thing in software is on-demand, which uses the web to deliver business applications. After all, companies like Taleo (NASDAQ: TLEO), Salesforce.com (NYSE: CRM) and NetSuite have done quite well with this model.
But, it's not a cure-all. Just take a look at Model N, which has about $44 million in revenues and is growing 60% per year. Some of the customers include biggies like Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE).
Something else: Model N doesn't use on-demand. Basically, it installs software on client sites.
OK, so what's the catch here? Keep in mind that Model N is addressing a new category in software: "revenue management." Or, to put things in English, the software helps companies boost revenues. And what company can say "no" to that?
Using some advanced algorithms, Model N helps with complex things like pricing, contract development, trade settlements and channel incentives. As a result, companies can help avoid things like revenue leakage.
"We not only help to boost the top-line," said Kamal Ahluwalia, who is the VP of Corporate Marketing at Model N, "but we can improve regulatory compliance. So, a company can avoid fines or other penalties."
Interestingly enough, this means that Model N must go beyond creating great technology. "We deal with complicated industries," said Ahluwalia. "So we hire domain experts, which makes us stand apart from the typical software company."
Tom Taulli is the author of various books, including The Complete M&A Handbook
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