How to price this software


-1

We are building software for a medium-sized company 'X'. Software is unique but strongly depends on data which the company 'X' can gather and plug into the software.

We develop that exclusively for them and for fix-priced milestones. We've learned that company 'X' has intention to sell this software in more countries.

Company 'X' is willing to make a service contract with us but only for 20% of cumulative price per year (which is OK but pretty low compared to their potential revenue).

Are there any standard models for this scenario? Can we ask for some extra money for each country?

Pricing Software Customer Service

asked Nov 26 '11 at 05:47
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James
102 points

1 Answer


1

I don't think you should be pricing your product to them based on their 'potential revenue' and market. They have hired you to build something for $X... that they anticipated selling to others and make their money. It's reasonable to setup a monthly or yearly retainer for you to maintain and add features to the software. And even charge more if it takes more time now that more clients of theirs are using it.

But, they hired you to build it at a set price, whatever they feel like selling it for should be their business and not affect your position.

answered Nov 28 '11 at 15:41
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Ryan Doom
5,472 points
  • Thank you, it sounds reasonable. If 20% / year support is normal for normal software, how would you tune the numbers if it's exclusive? E.g. another company Y interested in this software has contacted us, and we rejected it. – James 9 years ago
  • Well, I imagine it would depend on what type of effort you expect for maintenance and new features. I wouldn't expect someone to pay anything for nothing. So, it would be based on how much effort is needed. If you only have one client versus many using the software then it might make sense to think of it as a % but just as $20,000 or whatever. – Ryan Doom 9 years ago

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Pricing Software Customer Service