There are several types of models for affiliate management software. Below is a brief description of each model.

Hosted Affiliate Management Solutions or ASP (Application Service Provider)

Small to medium sized businesses typically use this model. The company hosts the software on their own servers. There is typically some type of set up fee and then a monthly hosting fee.

Hosted affiliate management solutions have several advantages
The company can easily install upgrades (you don’t have to worry about it) and additional features. They are typically very customer service oriented as keeping you as a customer is usually their main goal because of the nature of the model. 

Disadvantages
The only slight disadvantage is that you must recruit your own affiliates. However some companies do not necessarily see this as a disadvantage because when you recruit your own affiliates they are yours to “keep” (i.e. if you decide to switch companies and leave, your affiliates come with you).

Affiliate Management Network Solutions

When executed properly, an affiliate marketing program will jump start your sales, increase conversion rates and lower the cost of retaining customers. The most common affiliate program model is called “pay for performance”. The merchant pays an affiliate partner when a sale (or sometimes lead) is made. Think of it as being able to recruit a bunch of “commission only” sales reps. Only you don’t have to pay for their health benefits, social security taxes, etc.  Affiliate programs can return sizable ROI’s and increase brand awareness for a fraction of the cost of other advertising channels.

What makes a good affiliate program? While this article can not cover everything necessary to start an affiliate program, it will provide a guide that covers the fundamentals, and will help you get started in the right direction.