* The Business of Software

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How can micro ISVs afford to interface with big business?

I am a one-man ISV with a small selection of products, mainly ActiveX/COM components. I sell them online through a web site and do my own credit card processing via VeriSign's Payflow. You can download them for free and try before you buy.

Today I got an email from major corporation inquiring about my oldest, simplest, and cheapest component. It's a trivial little wrapper around some Windows API calls for the sake of ASP applications. If you're using VB, C++, ASP.NET, or just about anything else, you don't need it. The "enterprise" license, which includes unlimited installations and unlimited support, is less than $200.

From their initial email and my past experience, I can already tell where this is going. If I'm not super careful, this is going to be a colossal waste of my limited time.

Already they want:
- A conference call to discuss it
- Details about support and maintence costs (did they even look at my web site?)
- Examples of high-volume applications that use it (I don't know of any, other than one of my own sites that gets about 1.5M page views/month)

From experience, I know what comes next:
- More conference calls and meetings
- Many more written questions from various parties
- Request for custom license terms completely slanted in favor of the corporation
- Request for references that they can call
- Requests for silly things like 3 years of audited financial statements
- Purchase through a reseller (more calls and paperwork for me) or being set up as a vendor (even more paperwork)

All of this for a trivial, cheap, off-the-shelf component that they could just download and test for themselves. For that matter, they could write it themselves for less than the cost of investigating it.

So what do I do? I can think of two options:

1. Take a gentle but firm stance regarding the existing product. Answer their written questions briefly, point them to the download and online documentation, tell them that the off-the-shelf license is what it is--take it or leave it.

2. Invent a new high-priced license that caters to their bureaucratic needs. "Oh, you don't really want the shrink-wrap Enterprise license...what you need is the $4000 'Large Enterprise' license and the $1000/year support contract."

The problem with option 2 (and dealing with big corporations in general) is that I can't afford to invest a lot of time and energy up front to chase after big fish unless the larger payoff is certain. To put it another way, as a one-man ISV, I can't afford to invest several thousand dollars worth of my time (not to mention legal fees and opportunity cost) just for the chance of making a modest sale. And if I raise the price to the point that my risk would be worthwhile, they won't go for it.

It seems that ISVs have to reach a certain size before they can afford the overhead of doing business with large corporations. There's a tantalizing potential for making good money, but can a little dinghy even approach the aircraft carrier without getting swamped?
Jerome Morrow
Thursday, September 09, 2004
 
 
This is *so* familiar to me because both our customers and ourselves have evolved from an entrepreneurial, shoot-from-the-hip model into the world of meetings and bureaucracy. I've lived in both worlds and on balance I don't think either is necessarily any better, they just suit different personalities and phases of life.

Anyway, I'd be firm that for $X they can give your product a whirl (and they could probably expect some minimal documentation for that), and beyond that it's $Y an hour for support. You will still lose money at $X^2 for an 'Enterprise Edition' if you go up against a consultant who is incented to draw out the evaluation as long as possible.
Greg Tomkins Send private email
Thursday, September 09, 2004
 
 
We've definitely encountered this kind of customer.  It's quite a challenge to stay completely tactful while trying very hard not to let them bleed you dry.

However:  In my experience, these companies are the exception, not the rule.  We sell our products to lots and lots of big companies, and only the occasional one functions the way you describe.
Eric Sink Send private email
Thursday, September 09, 2004
 
 
To be fair, I do have a lot of big-company customers that simply bought their licenses online like everyone else and were no problem at all. I've only had a few high-maintenance customers like this one.

I guess I just fear I'm missing something in such situations. Maybe they're just a hopeless case and will drown me if I don't turn them away or insist that the standard license is all I can offer. On the other hand, if I could say the right things and structure the deal properly, perhaps I could meet their needs in a way that would be lucrative for me.

Usually the theme of their questions is scalability, reliability, support, company viability, and so on. They say they want to know if my stuff can handle their high-volume, demanding environment. Of course it can, and they could easily run tests to confirm that. I think what they really want is hand-holding and reassurance. They don't want to look stupid. They don't want to be blamed for screwing up a major project. They want bullet points and evidence to justify their actions to upper management.

I can't help but wonder if I'm missing out on good money because I'm not a better salesman. I've had several whales swim past me, but I haven't landed one yet. Then again, maybe the potential is illusory. Maybe it's just the Sirens calling, and I should plug my ears and sail on by.
Jerome Morrow
Thursday, September 09, 2004
 
 
We learned this lesson the hard way.  A US government sub contractor which in turn was one of the largest companies in the world wanted to purchase a high end license of one of our products.  In addition to the typical ‘too big for your own good’ questions they had a ridiculous quantity of forms and paperwork.  When all was said and done 2 weeks were spent back and forth on paperwork and contracts.  Then they indicated they required even more paperwork and it was the last straw, we declined and they did not purchase.

My advise, get out early, when you get sucked in you are waiting for resolution around the corner but many times it turns out the corner is a circle.  For a $200 product I would even avoid the phone and just provide a polite email with information on ordering, that there is only a standard license type and the license agreement can not be amended.
Pete
Thursday, September 09, 2004
 
 
I would agree with Pete.

After 15 years as a micro-ISV (still slowly growing into a mini-ISV), I can smell these a mile off, so I do what Pete recommends: a nice email with a simple pointer, and our standard terms. And I ignore anything further than that. For a $400 product (our general price point), it's not worth it.

On the other hand, if they're talking about a 50-pack, then clearly more work is warranted and I'll make some more time.

But if it drags on even in that case, we'll just shut down the discussion very nicely but firmly.
Chris Ryland Send private email
Thursday, September 09, 2004
 
 
This just doesn't happen with micro ISV's. Bigger companies get to deal with this. The company I work for has tried chasing potentially BIG deals many times. AFter a 6 - 12 month evaluation period and bending over backward to do everything the customer asked for, they would invariably walk away.

I would run, not walk, in the opposite direction. That big whale swimming by is, judging by my limited personal experience, illusory.
Bart Park
Thursday, September 09, 2004
 
 
This has happened to me twice. I do support and sales through email and web site and there is no company phone number. The first time, they (big government contractor) tracked down my home phone number and treated me to calls every day for two weeks asking all sorts of technical questions. They then wanted to negotiate licensing terms for my $50 program. They insisted on source code in escrow. I said no. They kept calling. I told them send $50 if you want it but you can't have the source code. They stopped calling.

2nd time (different customer, a well-known university) they wanted my $200 program. Must have had over 100 emails from them asking the same questions over and over. Finally they sent a bunch of documents for me to fill out - they wanted to know names, phone numbers, addresses, social security numbers and citizenship status of all the owners of the business as well as profit/loss statements for the business for the last few years. I told them no. They acted like they didn't understand my answer. I told them just send the $200 if you want the program.

After wasting thirty or forty hours with each of these cats: no sale.

I've considered a special bureaucrat tax where I upgrade the price for customers who are creating problems. I will try this attempt next time.

"It's $200."
"Fill out these forms."
"Oh you need my special form license then. That's $20,000/license. Send a check for $20,000 and then I will fill out the forms."
Scott
Friday, September 10, 2004
 
 
> I can't afford to invest several thousand dollars worth of my time (not to mention legal fees and opportunity cost) just for the chance of making a modest sale. And if I raise the price to the point that my risk would be worthwhile, they won't go for it.

Oh anyway Jerome, I recommend you do #2 - raise the price for them. If they pay, probelm solved. If they refuse to pay that much and go away, problem solved.

I think the trick is to either get money from them quickly or get them to go away without wasting much of your time.

Probably OK to invest strange things off the hip and see if they'll go for it. Maybe ask for $10,000 up front to study the licensing issues before you can discuss them further.
Scott
Friday, September 10, 2004
 
 
To those suggesting going with a more expensive custom license, from experience, this is not a viable solution.  These companies do not have the ability to issue payment before the forms are complete and endless questions answered.  There is an entire infrastructure which curtails efficiency and delays payment as much as possible.  Regardless of license cost you will not see funds until the paperwork and endless questions are complete.  In any case, they can walk away without purchasing at any time in the process.

When you politely decline custom license terms you quickly determine which of these companies actually need your product.  In many cases the project lead will end up putting the purchase on their personal credit card and getting reimbursed from the company directly.
Pete
Friday, September 10, 2004
 
 
In essence, the more expensive custom license *is* a way to politely decline, while still leaving the door slightly ajar.
Eric Sink Send private email
Friday, September 10, 2004
 
 
For a product costing $200 (or less), this ought to be within the discretionary spending limit of a manager.  Demanding that someone produce proof of citizenship is silly at this price point. (Do I send them a copy of my honorable discharge certificate and the past 5 years tax returns?)

I dunno, maybe this is where the "Enterprise License" comes in, where the cost goes up by a factor of 100, but they get the source plus a years priority support (you promise not to let it roll over to voicemail when you see their caller ID).
example Send private email
Friday, September 10, 2004
 
 
I agree that they're not likely to cough up any cash for a custom license without putting me through the wringer first. That's why I wasn't optimistic about option #2.

As you guys have rightly pointed out, I'll have to insist upon payment up front for anything special they want. If they go for it, great. If not, I'm saved from a loss.

Here's my email reply to them. After giving brief answers to their questions and pointing them to the free trial, I said, "Since the price of this package is so low, I'm sure you can
understand why we can't make a conference call part of the normal pre-sales process. However, for a consulting fee of $200 paid with a credit card, I'd be glad to spend up to an hour speaking with you on the phone and answering all of your questions."

We'll see what they say.
Jerome Morrow
Friday, September 10, 2004
 
 
I'd maybe be slightly cautious with questions of liability when it comes to charging big money. If they decide 6 months down the line that your ActiveX control was the point of failure that lead to business losses, someone might come up with the idea of suing you.

If you charged them $200, any judge will throw it out of court, you can't be expected to be liable for that amount of money, it isn't reasonable under law, at least in most westernised countries. However, if you've charged them $10000 then you might start to be seen in a different light.

Charging a lot more money means more than just getting a fatter check, you need to think whether you have the systems in place for when they start reminding you how much they spent, and that this is *your fault*... Life isn't fair, but EULA's aren't cast iron.
Andrew Cherry Send private email
Friday, September 10, 2004
 
 
I have worked for large companies that have behaved this way to small ISVs, I am definitely of the 'pony up the money or piss off' school of thought.

Obviously you have to realise that the people who want to use the software probably would be happy to pay the money.
At least once I have paid for something myself on the basis that it would make my life $100 or so better, it was probably against procedures but I didn't care much about being fired.

You must realise that the probability of them buying your software is pretty small since there is a decent probability that
a) the whole project will be randomly canned
OR
b) they will switch to a completely different technology
OR
c) decide to write the equivalent themselves
OR
d) decide to buy something else

Someone has probably got a list of 20 alternatives that they are being forced to waste months of their life (and yours) 'evaluating'.
Harvey Pengwyn Send private email
Saturday, September 11, 2004
 
 

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