Software Pricing
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How do you determine the price of software? This really bothers. I know I read it somewhere in some books or magazine articles, but I really cannot remember any more. How do you guys determine the price of your software?
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How do you determine the price of software? This really bothers. I know I read it somewhere in some books or magazine articles, but I really cannot remember any more. How do you guys determine the price of your software?
Probably there is a much better way of doing this, but I don't know it: We use a methodology here named SCC - "Se colar, colou" (Kind of a Portuguese for "If the customer pays, great!"). As a matter of fact, we don't determine the price of our software, our customers do. You'll sell your software for as much as your customers are willing to pay for. What we did was determine what is the least amount of money we could receive for our software without becoming broke. Then, we started selling it for 5 times our cost (we guessed - and were wrong - a sales figure for this price) and reduced it to try to find the best profit/price ratio. As we did this, we also started to understand better our customer base and the different markets and needs. Trying to make bits uncopyable is like trying to make water not wet. -- Bruce Schneier By the way, dog_spawn isn't a nickname - it is my name with an underscore instead of a space. -- dog_spawn
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Probably there is a much better way of doing this, but I don't know it: We use a methodology here named SCC - "Se colar, colou" (Kind of a Portuguese for "If the customer pays, great!"). As a matter of fact, we don't determine the price of our software, our customers do. You'll sell your software for as much as your customers are willing to pay for. What we did was determine what is the least amount of money we could receive for our software without becoming broke. Then, we started selling it for 5 times our cost (we guessed - and were wrong - a sales figure for this price) and reduced it to try to find the best profit/price ratio. As we did this, we also started to understand better our customer base and the different markets and needs. Trying to make bits uncopyable is like trying to make water not wet. -- Bruce Schneier By the way, dog_spawn isn't a nickname - it is my name with an underscore instead of a space. -- dog_spawn
That is an interesting approach, but you would face a lot of trials and errors until you find the right balance between the market price and your investment. Once I read somewhere (and I really don't know where) that software, being an intelectual property, should be looked at the methods developed, time taken to develop the methods and some other things, multiplied buy some third thing, and when you add everything together you you would get the approximate price. I am saying this because I wouldn't like to charge my customers too much, while at the same time trying not to make my work underestimated.
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That is an interesting approach, but you would face a lot of trials and errors until you find the right balance between the market price and your investment. Once I read somewhere (and I really don't know where) that software, being an intelectual property, should be looked at the methods developed, time taken to develop the methods and some other things, multiplied buy some third thing, and when you add everything together you you would get the approximate price. I am saying this because I wouldn't like to charge my customers too much, while at the same time trying not to make my work underestimated.
Husein wrote: Once I read somewhere (and I really don't know where) that software, being an intelectual property, should be looked at the methods developed, time taken to develop the methods and some other things, multiplied buy some third thing, and when you add everything together you you would get the approximate price. Well, if the only variables you have are the development costs, you'll end up having only a cost assessment. Anything that is bigger than your costs will give you profit. There's no such a thing as a "fair price". IMHO, the determining variable for your software's price is how much value your customer sees on it, no matter how much effort you put on it. As a sample, two extremes: Software A: Done in 3 days, poorly documented, buggy, ugly, lots of features are missing. You were the only programmer on the project. But it saves half a million dollars per day, if used by your customers. Your customers nor your competitors have no idea on how to create such a software. Software B: Done in 3 years, throughly documented and tested, design by Pininfarina, every possible feature is implemented. It needed a 80 programmer effort. But there are another 432 competitors in the market, all cheap, selling their software for $20. The software doesn't save the customer a cent. Which software do you think the customer will pay more? So, function point counting or estimation (I think it's what you referring to), is only used when you are doing custom development, i.e., you're only making a development task for someone. But, for determining the price of a product it helps nothing. Trying to make bits uncopyable is like trying to make water not wet. -- Bruce Schneier By the way, dog_spawn isn't a nickname - it is my name with an underscore instead of a space. -- dog_spawn