* The Business of Software

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Question about programmer pay vs. ROI

Can anyone please tell me if there's a general rule of thumb or not regarding how much ROI a software company should be getting on each programmer?  For example, if you're paying a programmer $50k/year, should the software he/she produces be generating $100k/year revenue?  200k?  More?
TonyB
Wednesday, September 08, 2004
 
 
Soft*Letter used to rank software companies based on revenue per employee. Most companies were in the $100 - $200K range with a single outlier, Microsoft, which was around $600K if I remember correctly.

That's per EMPLOYEE, not per programmer. Large software companies probably have 1 programmer for every 10 employees.
Joel Spolsky Send private email
Wednesday, September 08, 2004
 
 
"The Business of Software" provides a good overview of profitabilty in the software industry.

http://www.amazon.com/exec/obidos/ASIN/074321580X/qid=1094671902/sr=ka-1/ref=pd_ka_1/104-4193272-3562358
Ewan's Dad
Wednesday, September 08, 2004
 
 
When deciding how much money to charge for a "custom" customer requirement, then we charge three times the developers' cost, based on the inaccurate estimates of how much time it will take to develop.

I don't know if that indicates that we target for a minimum ROI of 300% or it's just a rule of thumb derived from our overall experience of how developers tend to estimate requirements at the 60-70% or the actual time that will be needed, but it definitely makes us take estimation more seriously.
Dimitris Staikos Send private email
Thursday, September 09, 2004
 
 
I made $25-30K this last year.  One of the products I developed is set to bring in $1M with a pending deal, and the other products I've made have done pretty well.  I also write the documentation for the products I develop and do support for them (and answer the phones for general company calls).  Plus I've written some general libraries (script interpreters, license protection, cross-platform garbage collection, etc) that touch almost every product we sell.
Anon for this
Thursday, September 09, 2004
 
 
"Anon for this" -

You need a raise, man.  Based on what you said (and assuming you're in the US), you should be making double that.
example Send private email
Thursday, September 09, 2004
 
 
I'm in New York.
Anon for this
Friday, September 10, 2004
 
 
Anon for this,

Did you do more than just code and document the program?

I.e., did you spec it out? Do you understand the customer, etc.?

If so, then you're worth more than $30k/yr.


I'll answer this from two perspectives:
Business owner and Employee:

EMPLOYEE PERSPECTIVE

Perhaps you should start your own company, or join the competition.

Bear in mind that there is a LOT more to a money making product than just writing code. Depending on the company, that might be incidental. E.g., our software itself is probably 15 to 20% of the value. Then there's the data that the software uses - that's worth another 10 to 15% or so. Then marketing, sales, support, etc.

Even by this metric, if you wrote the whole program than you created a value of $150k or so.

But, in the end it's a negotiation with your company: they will pay you as little as they must (sounds like $30k/yr) and you'll demand as much as you can get (sounds like $30k/yr UP TO THIS POINT).

SUGGESTION
Present a case for your value. Ask for a raise. Do this all very nicely. Do not make threats, etc.

If they refuse, you can consider moving on.

OWNER PERSPECTIVE
(This is how I'd view it being an ISV ownewr)

If you had to hire a replacement, how much would he/she cost?
THAT is what you're worth.
Mr. Analogy {Shrinkwrap ISV owner} Send private email
Saturday, September 11, 2004
 
 
Yes I came up with the design of the thing based on the problem that some customers described.  Beyond that, I came up with lots of other flourishes to expand the possible market for the program (which have worked very well in gathering interest).  I've never worked in a place where I was handed solid specs and just had to code something that satisfied them.

At this company, when I've had something like "specs" it's been a vague cloud-diagram paper with some extraneous detail and much unspecified behavior.  Generally I happily ignore those and just come up with something that satisfies our customers or whatever the specific need is.  But I didn't even have something like that for this particular project that I'm talking about.

But the problem is that the owner seems to think that it was all his idea.  Essentially what happened was that he was sitting there with me when we were talking to these people who had this problem.  He had a few comments on what a solution might look like, but I didn't make anything like what he was suggesting (which was only a partial description of a vague feature to begin with).  What I built was MUCH more thorough and featureful than anything he mentioned in that brief 10 minutes or so of talking.  Unfortunately I should have seen this coming when he once admitted over lunch that he'd previously taken credit for somebody else's ideas.

Now he says that there'll be "rewards" for "everybody" once this million dollar deal goes through, but last time I was promised vague "rewards" I came out the other end still making $25K (not to mention that "everybody" had nothing to do with this project).

Now he's demanding more feedback and ideas on this (and other projects), and I feel absolutely zero motivation to help out.  I feel like any ideas I come up with will gain me nothing, and I'd be better off just going to work for McDonalds and working on my ideas in my spare time.  That track seems to have better growth oppportunities for me than this one.

And Mr. Analogy, I think that you're probably right about the typical owner's perspective.  But I think that the trouble with it is that it makes programmers equivalent where they oughtn't be.  You can probably hire a programmer off of the street for even less than I'm making.  Does that mean I should lower my rates?  Pretty soon I'll be pressing up against minimum wage.  Unfortunately it doesn't seem like the owner's perspective incorporates actual value produced for the company's bottom line.

But despite what some people might think from the money I'm making, I'm not a total idiot.  I have been working a lot in my spare time on some product ideas that are much bigger and more ambitious than anything I'm doing at work.  That seems like my best bet for the future right now.

I wonder how many other people have experiences like this.
Anon for this
Wednesday, September 15, 2004
 
 

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