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Stephen Jones

Suggested Software's Price?

What is your suggest price a third party add-on for a commercial application (product X) with the following specs :
- $750 purchase price
- 5,000 users
- 1100 users who receive a printed newletter monthly outling the software's capabilities
  (for which you will receive space to advertise the new product)

As much as 95% of the userbase would be interested in the third party add-on.

The add-on took 80 hrs to develop, and there aren't any competitors for its functionality.  The add-on adds functionality that similar competition for product X already has.

I have released a "dumbed-down" version of the add-on to a product X support group and have had ~ 500 downloads the past year.


Lastly, before I get the comment "you shouldn't pursue this because there isn't a market", whether I had sold the application or not, this functionality gap needed to be filled, and so at the very least, the add-on was going to be developed for my own personal use.  Any additional copies sold is just gravy.
PriceHelp
Thursday, October 21, 2004
 
 
This is the Internet, so instead of answering your question, I'll unask it and answer a different way...

Can you sell your source code lock, stock, and barrel to the original vendor to bundle with their product?

If you don't do that they may just add the feature on their own.

In that case it's easy to figure out the price: about 75% of what it would cost the original vendor to write the code from scratch themselves.
Joel Spolsky Send private email
Thursday, October 21, 2004
 
 
Interesting how some of the context of the question is contained within my head but I fail to convey that information within my question.

I'm assuming that the 75% suggestion is if I were planning on selling the codebase back to the vendor? Sounds appropriate.  I have talked to the president of the company, and while they do plan to provide this functionality, he says that its at least a year or two away.  If the found that my add-on fills the niche, they may consider purchasing it.

I was actually looking for pricing suggestion for individual licenses for individual users.  Although, the same percentage sounds reasonable if applied against the original package price.  75% of $750 ($525 for a specialized add-on?) may be appropriate, especially considering this a financial decision support package ($1000's if not millions on the line for users), but of course this is just a gut feel.
PriceHelp
Thursday, October 21, 2004
 
 
MARKETING is (IMHO) the biggest challenge with nearly any company.

HOW are you going to reach all of these potential customers?

Company X has a direct pipeline into those customers.  THEY can sell it easier than YOU can.

TWO PRONGED ATTACK
How about selling a watered down version to Company X to include in thier product.

You could then offer an upgraded version for a nominal additional cost.

1. You get cash immediately.
2. X gets a competive feature immediately.
3. You get exposure to ALL of thier customers immediately.
4. You can more quickly see if customers like your product, AND are willing to pay for your upgraded version.

 Thus, you get your name/product out in front of ALL of these users and maybe make a little money. Then you can try to upsell them.


OTHER BENEFITS YOUR PROGRAM PROVIDES TO COMPANY X

Also, remember that one benefit to Company X (of buying YOUR product to include with thiers) is that they get FASTER TIME TO MARKET. That means they can start making money off it NOW instead of waiting 2 years.

And it helps them compete.

So, your product's value may be that it helps sell THIER product. It's really analagous to Microsoft trying to sell Win3.1 in the old days: having a MS Word on thier helped sell Win 3.1. For a long time they made more on the O/S than they did on the applications.

Your product MIGHT drive sales of Product X.


Also, they may not have the developer resources available to develop this add in.  That means it might cost them MUCH MORE to develop this product.



BTW, this is a great question to post on:
www.softwareceo.com
This is the sort of thing those folks deal with: business of software.

Good luck!
Mr. Analogy {Shrinkwrap ISV owner} Send private email
Thursday, October 21, 2004
 
 
Thank-you so much Joel and Mr. Analogy for your help.  I'm going to carry this post over to Softwareceo to see if I can gain any further insight.  Thanks again.
PriceHelp
Thursday, October 21, 2004
 
 
PriceHelp,

something sounds fishy. Unless the product company is run by morons (a possibility):

- They would have at least as good an idea of what features their users would be interested in, especially the one they would be willing to pay for. Lets assume the 95% figure is rigth.
- Since it is their product their developers would probably easily match that 80hrs development time, probably do it in far less.
- they would have an easier time marketing the add-on, since they presumably own the software's main site and the newsletter.

So their initial layout for producing the add-on themselves is 80hrs dev + some marketing.
What kind of a market would they be willing to let you have in light of these costs?
10K?20K?
Just me (Sir to you) Send private email
Thursday, October 21, 2004
 
 
Price help, you have not understood Joel's point.

Joel is saying that you should charge the company 75% of the cost to them of developing it inhouse, not that you should charge the user 75% of the cost of the product.

Calculating what it would cost the company is a dificult matter, as much depends on what else their developers could be doing in that time, but I would say $100 an hour would be reasonable, so presuming it would take them the same time it took you you should be charging the company round about $5-6,000.

Per user it's hard to say. You want to get money from those who purchased the dumbed down version, so you need to work out how much more cash the final version is worth.
Stephen Jones Send private email
Friday, October 22, 2004
 
 

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