Reply to: Plan B - Getting to grips what 'real' businesses charge for software

[SueEllen]

Was his name Atul? They probably just misinterpreted what they were asked to do.

Wait until the client asks for the code - it happened on a project I was on.

It resulted in one very p*ssed off client as they owned the IP to the non-existent tool.

OK the consultancy did give the client something but it was cr*p.

What was more funny is that the consultancy gave it in an obscure language. Unfortunately for them the client had someone who had developed in it.

[tomtomagain]

If you develop something for a client from scratch then they would have a good claim on owning the "IP" for that product.

In which case you would be unlikely to be able to charge a license fee. You may well be able to charge an annual maintenance contract.

If the client is not careful then you could end up owning the IP. They might not really want to own it. They might even let you license the product and to continue development on your own $s.

In which case you can then go and flog the same product to their competitors. That is the holy grail of enterprise software. Get client A. to pay for product development ( as discussed before that's easily into the $1M for any decent sized product ). Then sell it to their competitors for a license fee + configuration charges. Hundreds of millions of dollars have been made that way.

[vetran]

Since the responses have been surprisingly helpful, I'll carry on...

If you are selling bespoke, is it normal to actually sell the thing or cahrge for development and then charge a license on top? It seems to happen but always struck me as practically daylight robbery to charge for permission to use something they paid for!

suppose it depends how much existing code you use. If you write from scratch just for them then it would be cheeky (but not unusual)

But if you use existing code & build on that then why not. e.g. you have already written a library to communicate with 'Big product' and you then write a tool for the customer - then why not?

[d000hg]

Since the responses have been surprisingly helpful, I'll carry on...

If you are selling bespoke, is it normal to actually sell the thing or cahrge for development and then charge a license on top? It seems to happen but always struck me as practically daylight robbery to charge for permission to use something they paid for!

[Freamon]

It's hard to come to terms with the numbers.

I was on a project where 500K (half a million £) was paid to Bob to develop a tool.

I was on a site visit and found they had not developed the tool, they just had a guy in the corner doing it manualy when required.

Was his name Atul? They probably just misinterpreted what they were asked to do.

[AtW]

I'ts 1600 times your turnover.

[MarillionFan]

I thought you had position of responsibility???

I'ts 1600 times your turnover.

[AtW]

Why ask for trillions when you can ask for billions?

[proggy]

Always start high expecting to be negotiated down as bit. So Add 20% on your price based on hours and be willing to negotiate down.

[NotAllThere]

To get a ballpark figure, multiply the number of days it takes to develop by daily rate by number of developers, divide by the number of units you expect to sell in a year. So, if it takes 3 of you 60 days to make the product, and your usual daily rate is £400, and you think you'll sell 2, you should be thinking of ~£36K. You might end up selling it for £5K, or £100K (to a large company). Then 15% of the sale price is the annual maintenance fee - also payable in the first year, pro-rated.

[AtW]

My budget for this year is $1.6m.

I thought you had position of responsibility???

[AtW]

Have a look at Oracle licensing costs and your figures look like small change!

And that's for off the shelf software....

It's a very tall shelf that requires specially trained and licensed staff to pull that software from...

[vetran]

there were some good links on here a few weeks ago. They made the point that the first thing you sorted was the price & Market before you fired up the IDE.

The key thing is not how much it costs but how much are they are willing to pay.

Oracle & SAP charge shedloads because people are willing to pay.

If its a big number then you need to know how much the client is willing to pay up front & organise scheduled payments so you aren't out of pocket if they change their mind/run out of cash, fastest way to bankruptcy to ignore that.

Bespoke software which is either T&M for quote (or if small job you can take a flyer) then a fixed price on a defined specification or T&M for the lot with an estimate + deviation.

A product (where you develop to sell to multiples) is different.

[Pondlife]

how long is a piece of string

I've seen companies spend £1.5M to implement SAP at one site and others who've spent Billions to roll it out globally. These are implementation costs not software dev.

I have two projects on the go at the mo. One has a budget of $8M the other $0.5M, both are similar but the complexity and scales are different.

[IRMe]

Worked with a team doing some bespoke software development and provision of infrastructure to run it (test & dev rigs + live). Four devs (three exp, one grad), PM, part time senior chap, Tester\BA (grad hire), three infra guys (one senior, two grads). A good year would take about £1.5 to £2m plus expenses i.e. rig hardware, travel, anything the co. could think of.

Grads fresh from uni were charged around £350 to £450 a day. A generic 10% to 15% was added to everything to cover sales

That eventually wound down to a team of two dev, three infra, and a PM billing about £1m, which was mostly keeping the product warm and minor enhancements.

Quite cheap looking back at it. Big4 technical types start their prices at around £1000pd and that's a low end resource.