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Pricing bespoke adaptation of existing product

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    Pricing bespoke adaptation of existing product

    A bit of background on me; permie-tractor on and off between 2000-2012, after which I left a finance contract position to try and strike out on my own, selling consumer targeted PC software online. I had no desire to become the next Bill Gates, instead following the ethos of "start small and stay small" - really, I just wanted to generate a location independent source of income without the unpleasantness of having to work for someone else, especially in any sort of corporate environment.

    Cut to today, and after launching my product in 2013 I have been living off it (and supporting my family) ever since. Not big bucks by any means, but in a good year a comparable income to contracting, and of course entirely outside of the remit of IR35, work my own hours as required etc - so not bad, overall.

    Without going into too much detail on what I sell (and I have a few different offerings now), the guts of it are that all my applications allow users to view, edit and manage data from a certain class of consumer electronic devices. Most of the manufacturers of these devices use proprietary file formats for their data and often guard it quite closely despite, in most cases, not offering a product with capabilities like mine, that would let the consumers actually use this data. I managed to reverse engineer the required file formats for a couple of the bigger players in this space (indeed, I wouldn't have a product if I hadn't), and over time these manufacturers have come to know about (and tolerate) me, without ever going so far as any formal cooperation.

    Now to my current situation:

    In March I was contacted, out of the blue, by another big player in this industry, whose file formats I have never tried to reverse engineer. They were apparently getting requests from customers that their products be compatible with my software. This led to a Teams meeting with a business manager and a couple of tech leads, where we talked about whether I thought it would be possible (yes). After that, they drafted an NDA, which I signed and returned, as a preface to them sending the file format documentation.
    At this point, I am not sure what the terms of reference are for this engagement. At its simplest (and probably my original assumption), is that they would just give me their file formats, ask me to include support for their products in my applications, and let me get on with it. Not a big deal, I would certainly do it as it would open up a new potential customer base of people who use this brand of product, and the effort to me would not be that great (once data is imported into my applications, it all gets treated in the same way, so we are talking about adding a fairly thin IO layer to support a new product, and that’s pretty much it).

    Three months later, I finally get another meeting invite which they want to have before sending the documents over. This meeting includes a slide show outlining what they want from the (my) product, and it becomes clear that they have spent some time studying my website and software – which might go some way to explaining the long delay between meetings. Needless to say, this feels a little different to my initial understanding (which wasn’t really based on anything), and almost felt like the beginning of a commissioning process – but still we have no terms of reference; the meeting ended fairly swiftly, and files were sent to me so that I could make a more informed decision on whether or not the project is feasible (it is).

    Disclaimer: I am not a business person, I am a programmer, and I have somehow managed to muddle through nearly 10 years of running my own business without that ever changing.

    So, given that they now seem to want some control over what I produce, my guess (hope?) is that they are either thinking along the lines of commissioning me to produce something directly for them, or that they sell it/we revenue share, or whatever – essentially, some kind of monetary arrangement.
    Is it normal in these sorts of situations for the terms of reference to be so vague/undefined/unmentioned in the early stages? A friend of mine who works on the commercial side thinks it isn’t uncommon – project feasibility etc comes first.

    If they do want to commission me, how would I price this? The changes I need to make for them might not be that great (perhaps a month’s work), but of course the core product itself is years in the making (this also depends on how many changes they want to the core product, in addition to the IO changes needed to support their products). My initial thoughts are to charge a fixed price, based on estimated hours, for the changes that are required, and then propose a revenue share for sales of the product. This presupposes that they intend to sell the product, and not give it to their customers for free, of course.

    It is worth noting that the company in question did have an application of its own that did much of what mine does, albeit not that well. It is old, though, and was not kept updated as Windows versions changed, and as their own products also changed. It was discontinued by them last year. I think they see my product as a way of replacing this.

    I’ve probably come across as pretty clueless on the business side of things here, and that is indeed the case. I think what I’m really looking for is a bit of guidance on how to approach this whole situation.

    #2
    What's the TL;DR?

    Comment


      #3
      Originally posted by ladymuck View Post
      What's the TL;DR?
      I've got a product on the market that took years to write. A multi-billion$ corporation wants me to adapt it to work with their hardware. It wouldn't take me long. How should I price it?

      Comment


        #4
        I have done work on similar stuff to this before and provided consultancy on this stuff.
        Its not uncommon for firms like this to be vague. They are "shaking the tree to see what falls out".
        You could bill them for changes (possible) man hours + a few %
        Take a revenue share - do lots of due diligence here. Make sure they will be able to pay.
        Try a hybrid approach - man hours + revenue share.
        Ask lots of searching questions of them. How do they see the product selling etc? Ask them, why me?
        You will want to keep hold of your own IPR so perhaps look at how you do that.
        If they ask you sign anything other than a bog standard NDA - get a lawyer.
        Happy to answer any questions and have a general chit chat on here about this, so please feel free to fire away.
        Former IPSE member
        My Website

        Comment


          #5
          Originally posted by ladymuck View Post
          What's the TL;DR?
          now, now let him get the advice he needs. The devil is in the detail on stuff like this
          Former IPSE member
          My Website

          Comment


            #6
            Originally posted by courtg9000 View Post

            now, now let him get the advice he needs. The devil is in the detail on stuff like this
            Text is too small. Too Long, Couldn't Read.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Originally posted by mattster View Post

              I've got a product on the market that took years to write. A multi-billion$ corporation wants me to adapt it to work with their hardware. It wouldn't take me long. How should I price it?
              The quick answer is is to get a salesman to do it.

              Or talk to them. Find out their budget. Draw air in through your teeth, tell them it will take time to do an impact assessment.
              Get a T&M SoW with them to do the assessment and discovery.

              Let's be very clear. If they are that big it's never going to be a small job. What about governance, security assessments, BCDR, pen tests, support, handover, UAT, OAT, test plans, etc. etc. etc ?
              There's got to be 3 months work before you actually deliver a single byte of code.
              See You Next Tuesday

              Comment


                #8
                Originally posted by Lance View Post

                The quick answer is is to get a salesman to do it.

                Or talk to them. Find out their budget. Draw air in through your teeth, tell them it will take time to do an impact assessment.
                Get a T&M SoW with them to do the assessment and discovery.

                Let's be very clear. If they are that big it's never going to be a small job. What about governance, security assessments, BCDR, pen tests, support, handover, UAT, OAT, test plans, etc. etc. etc ?
                There's got to be 3 months work before you actually deliver a single byte of code.
                Get a salesman to do it - Almost impossible, the guys who can do this stuff are very thin on the ground and often well booked out. I could do it if I wasn't retired and had space but it would cost, a lot.
                As for the t&M SoW. Highly unlikely he will or a salesman on his behalf will get them to spring for this.
                You are right in your last point.
                Former IPSE member
                My Website

                Comment


                  #9
                  Thanks for the replies. Lance, you are no doubt right - if this becomes a fully bespoke delivery to them, then the amount of corporate BS will likely overload the development time. My preference is still for some middle way, where I adapt the software (minimally) so that it works with their hardware, perhaps exclusively, and they handle the marketing side. With them behind it, and their reach to their userbase, sales would be at least one, perhaps two orders of magnitude more than what I could achieve - especially since I don't currently support their hardware, and so have little reach to their users.

                  Courtg, "why me?" There is nothing else out there that does this commercially right now, and probably for good reason - there isn't much money in it. OK, enough to keep me ticking over as a one man band, but not enough to interest any real business. As for sales, I don't think they are doing it for the revenue. This is probably an annoyance to them, as much as anything else, in that some users will pester for this functionality, and they don't have anything to offer them. They used to have their own product, but that is now legacy and more or less unusable with newer hardware - hence discontinued. We are not talking about a very complicated application, but after implementing the required functionality, making a usable and robust UI, documenting etc then yes, a couple of man years of labour, no doubt (much) more when done within a corporate structure. So it would cost them several hundred grand (and the rest) to make their own, but I don't think it is worth that much to them, so they haven't. This makes the concept of what this product is "worth" to them rather nebulous. Having said that, they have come to me, we have had two meetings (fairly senior guys at their end), and they have obviously put a fair bit of work in between meetings, so they are keen.

                  Comment


                    #10
                    Court, one more question for you if I may. When do I start pushing for some sort of explicit terms of reference here? Do we just carry on this vague back and forth, talking about the product and what the work involves, do I push it at the next opportunity, or just wait for them to say something? I have a memory of the main guy saying that he would include a terms of reference document in the files he sent over after the last meeting, but nothing was included. Now I'm doubting my own memory of the meeting!!

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