OT: Software Licensing Fees

Tue Jul 10 08:35:48 MST 2012

I agree with JD.

1. Take a look at what exists today and negotiate a maintenance contract
just for that. Any new features beyond what is there today will entail (1)
a development cost and (2) a maintenance cost for those features. You may
decide to include the maintenance on a new feature is so small it will be
part of the current maintenance contract, but all new features need to be
paid for.

2. Finally, spend you free time figuring out how to automate the
maintenance of what you already have, (ie whatever it takes to reduce the
amount of time you spend on maintenance) and make those changes so the time
spend on maintenance goes down.

Mark

On Tue, Jul 10, 2012 at 8:23 AM, JD Austin <jd at twingeckos.com> wrote:

> Hi Pete,
> First of all 'Adding new features' is NOT maintenance; did you agree to
> implementing new features as part of your maintenance agreement?.  $15/hour
> is not even close to industry standard.
> You are correct.. it is not worth the time you're spending on it.  I would
> immediately 're-clarify' what you're willing to do for the small amount
> they're paying you; specifically stop creating new features and only
> maintain what you've already created (bug fixes and OS related updates
> only) .  If they want more then it's time to re-negotiate.
>
> I understand with glaring clarity that I'm am replaceable and know making
>> demands never works.
>
>
> Anyone they bring in will have to climb the learning curve of the code
> you've created; you're not as replaceable as you think.  I would say don't
> make threats or demands... just be open and honest with them about it.  If
> it were me I would simply state that while you've added new features
> without demanding additional compensation in the past that doing so has
> become a barrier to the success of your business due to the increasing
> amount of time involved and that you can no longer continue to do so.  Say
> you'll continue to support the application you've created for them as
> agreed for the price agreed but that support does not include implementing
> new features.
>
> Don't feel too bad... I've made the same mistake you have Pete... I tried
> to be 'the low price leader' for way too long   :)
> Charge at least 7 - 10 times what you're charging them; think 'if I had to
> take myself out of the equation how much would I have to spend on a
> competent programmer to do so'   (salary.com is a good indicator).  I too
> was stuck in a situation where I couldn't even hire someone to take over
> the work that was killing my business; bad situation to be in :(
>
> JD
>
> On Mon, Jul 9, 2012 at 11:52 PM, AZ Pete <plug at cactusfamily.com> wrote:
>
>>  Hi All,
>>
>> First of all thanks to those folks who responded with some helpful points.
>> To clarify some of the questions asked:
>>
>> I understand with glaring clarity that I'm am replaceable and know making
>> demands never works.  Over the years, the company's revenue has increased.
>> But also over the years, I've spent more time adding features. It was
>> probably my fault for not clearly detailing how much time I'd spend adding
>> features & functionality versus just maintaining the existing application.
>> Last year I did a bit of calculation on how much time I spend on
>> maintaining and improving the application versus my percentage of revenue
>> compensation and I came to a rate of about $15/hour.
>>
>> While in the very beginning of this project, I did it more for the
>> learning of building a large application and the money was a nice side job.
>> But now, it seems the hours got longer (due to significantly increased code
>> base) and the pay didn't keep pace.  At ~$15/hr it's just not worth the
>> time to keep staying on the project.  However, to get the compensation to a
>> more "market-rate" level seems very difficult.  The revenues for this
>> business market (its academia & government) has been going steady down (the
>> owner must keep lowering bids each year to get a contract). Looking at the
>> numbers coming in, if he had to pay me a market-rate for programming, his
>> IT budget would double or more and the business would go under.  Which
>> leads me to think that perhaps this isn't a viable business anymore if one
>> can't make enough income to cover the costs of infrastructure.
>>
>> Maybe it's time to let this one go...
>>
>> Thanks for letting me rant!
>>
>> Peter
>>
>>
>>
>>
>> On 7/9/2012 8:01 PM, Mark Phillips wrote:
>>
>> I don't quite understand what is going on.
>>
>> Has their gross revenue remained flat for all these years, do you are not
>> making add much as before? Or, are you now thinking that the percentage is
>> too low?
>>
>> Are you spending more time maintaining their servers and performing
>> updates than when you started? Are you creating new functionality for them?
>>
>> Mark
>> On Jul 9, 2012 7:16 PM, "AZ Pete" <plug at cactusfamily.com> wrote:
>>
>>>  Hi All,
>>>
>>> I'm in a bit of a quandary about fees I'm receiving from a long time
>>> client and thought I'd tap the PLUG brain-trust to get some input.
>>>
>>> This situation is this:
>>>
>>> A few years ago I developed a PHP application that a client uses to run
>>> their business (its a typical LAMP platform). Without getting into tedious
>>> details, this software application is used to run their entire business.
>>> It is understood that the software ownship resides with me and they are
>>> paying for its use - licensing it, if you will.  At the start of this
>>> project, we agreed upon a certain percentage of gross revenue that I would
>>> receive as payment for use of this software.
>>>
>>> In return, I would maintain the software, provide various updates or
>>> additions, and some light server admin work to keep the application
>>> running.  This arrangement has been working quite well and the business
>>> relationship is excellent. However, I feel now that the percentage I
>>> receive is too low (it hasn't been changed since the start of this
>>> venture).  I have broached the subject of having to update our arrangement,
>>> but was met with some resistance.
>>>
>>> I wanted to ask fellow consultants/contractor/software devs what is the
>>> "going rate" for such an arrangement.
>>> Namely, if you are licensing a software product to a client for their
>>> use, what is a reasonable percentage of gross revenue a business should
>>> expect to pay. Especially, a software product that is the core component of
>>> their business without which the business wouldn't exist.
>>>
>>> Any thoughts would be *very* appreciated.
>>>
>>> Thanks,
>>> Peter
>>>
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>>
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