To: Tom Stivers, Dick and Scotty the wonder dog.
With all due respect, I'm afraid you guys don't have any more
idea of what it takes to develop, market, and support software
than Mr. Spider does.
The $700 price differential of JFW for NT over JFW for Win 95
is due to the cost of developing, marketing, and supporting JFW for NT
having to be spread over a smaller customer base. It's just that
simple. If you want the NT version and the 95 version to be close
to the same price, HJ would have to raise the price for the 95
version and then people would complain that 95 users were paying
the ride for NT users.
Here's another long lesson in software development so skip now
if you're not interested.
I started coding in high school in 1971. I've been working in
the computer industry since late 1976. I have some first hand
knowledge of these kinds of things. That knowledge
and experience makes me really admire Ted Henter and the
people who work for him, so I'm going to defend them. (At no
charge even! [grin])
Before anyone says what they think the price of JFW quote
should be end-quote, it would behoove them to go through
a cost analysis something along the lines of the following.
JFW for NT is not just a re-compile of JFW for 95. When a program
( JFW or any screen reader) is so closely "married" to the operating
system, it takes a re-write of the code, not just a re-compile.
Even when every line is not re-written, every function call
needs to be looked at. That takes time. And for every line
that is changed, it needs to be tested.
Take a look at what happened to GW-Micro's Window Eyes for Win 95.
It wouldn't even run under Windows 98! That's further evidence
that you can't just take one program and move it to another,
even if similar, operating system. (And just to speculate,
maybe if GW-Micro charged more, like HJ does, they could have
afforded more programmers to get the job done on time. But that's
just guessing on my part.)
First, Ted Henter had to hire programmers that knew the INSIDES
of NT, not just Win 95. Then he'd have to pay them for several
months while they produced nothing while they learned the in's
and out's of JFW. Those guys pull in big bucks, so even
at 6 months times two people, he could have spent $60,000 in salaries,
just getting two new programmers up to speed.
Then don't forget the overhead of office space, computers, software,
benefits, supervisors, management, etc, etc. So $60,000 in salary
equates to about $90,000 spent by the employer.
Suppose he couldn't hire any because there is a shortage of GOOD
NT programmers, he would have had to train his current programmers
in the inner workings of NT. Again, that takes time and money.
So it's still 6 months to get programmers up to speed, and about
$90,000 spent while nothing is produced yet.
But we haven't even gotten to the support department yet. Same thing
there. Either hire people who know NT and train them in JFW. Or
take the current employees and train them in NT. And we're not
talking about CASUAL users of NT. We're talking about people who
know it well enough to do phone support, to read people's minds over
the telephone, to know all the little quirks, to know the glitches
gotchas and bugs of NT and how JFW interracts with it. To the CASUAL
user NT and 95 may look very much alike, but to someone who has
to take the phone calls and fix problems, the similarities are only
superficial. And by the way, since almost all NT machines are on
a network, the people who support JFW for NT better know NT networking,
too. And NT networking is different from Novell, which is different
from 95's peer to peer, etc, etc.
HJ's support department and programming department need NT
workstations in addition to the Win 95 workstations. And don't
even suggest dual boot. Because of how JFW is "married" to the
operating system, how it reacts with NT in a pure NT machine is
going to be different than how it reacts with NT in a dual-boot
machine. So even in addition to the solely NT machines, the
support department better have at least one dual-boot
(95 and NT) machine because you just know some customer is going
to want to do it.
So let's budget another $40,000 to get the support department up
and ready for NT. We've now spent $130,000. But wait, that was just
to get them up to speed, that wasn't to develop anything. Suppose
it takes a man-year of programmer time to develop, TEST and DEBUG
the NT version of JFW. That's a LOW estimate! That's another
$90,000 on the programmers.
Just to get JFW NT out the door, BEFORE EVEN ONE SALE IS MADE,
Ted Henter had to figure on spending AT LEAST $220,000.
But wait! Our lesson isn't finished yet. In addition to development
costs there are marketing costs (how much you have to spend to make
a sale, and deliver the product), and support costs (the customers
are going to call you on the phone).
It costs money to send out salesmen to get the word out. Even if
they don't physically leave the office, someone has to contact
prospective customers and say "Hey, we got JFW for NT for sale!".
Someone has to network with NFB and ACB. They need to contact the
personnel departments and I S departments of companies and government
agencies who are known to hire the blind. It's really a stab in the
dark to guess how much your marketing costs PER COPY will be before
you sell any, but a budget still has to be developed.
Then for each copy sold, you can count on an average of X number
of hours of AFTER-SALE phone support. Even if the customer
doesn't purchase the SMA, you still have to provide some
phone support. Because if the user can't use it, they're going
to demand their money back and bad-mouth you to everyone else.
(Like I've done to certain other companies. [grin])
So you have to budget some amount of after-sale support into
the selling price.
You also have to figure in the cost of money. That $220,000
costs a lot more than $220,000 because it has to be
borrowed from investors or a bank, or even Ted Henter may have
borrowed it from himself. Even if he used his own money, he still
deserves a return on the investment, because he could have put
that money in the stock market and had it working for him.
Because of the "cost of money" let's say that the $220,000
costs $300,000 over the borrowing period.
Because the market for JFW for NT is so much smaller than
the market for JFW for 95, the marketing costs per copy
are going to be much more. I'll take a stab and guess $400
per copy for marketing costs, and $300 per copy for support
costs. (Yes, that looks high, but if you've ever had to
support NT products, you'd know why.) $400 marketing
cost out of a list price of $1500 is 27 percent, which is not
out of line, and, if anything, is on the low side.
Based on my experience, I'm very confident in assuming that
the $100 per year or $200 per year SMA does not come anywhere
near the true cost of ongoing support and updates. I'm supposing
that HJ bundled a major portion of the support costs into the
selling price due to the nature of how customers fund the purchase.
It's much easier to get funding for "up front" costs in government
sales (either direct sales to the government for their blind
employees, or in cases where state-run vocational rehab pays for
individuals).
So there is $700 per copy that comes out of the price before we
even begin to pay for development costs.
We're still not done yet. We need to take into account
that we need to keep those programmers on the payroll to come
out with new versions and bug fixes. If you don't constantly
update your product you go out of the software business.
(As an aside: The rule for hiring programmers is: "You can't hire
just one." There is so much job turnover it's ridiculous. If you
put all your eggs in one basket and he or she leaves, you're
screwed, that's why you need AT LEAST 2.)
Two programmers at $60,000 per year plus the usual 50% overhead
(floorspace, computers, benefits, management, etc.) equates to
another $180,000 per year. (This figure is a little high because
the NT programmers are also available to work on the 95 version,
so their cost can be spread PARTIALLY over Win 95 sales and not
soley NT sales.) Let's deal with a TWO year period, so we add
$360,000 to the $300,000 development cost for a total two-year
figure of $660,000. That's $660,000 for development and 2 years
of product maintenance. (Did you notice how ongoing costs
quickly exceed the already high development costs? That's why you
need to charge for an SMA, and why $100 or $200 per year is CHEAP!)
Do you folks get it yet? Ted Henter had to plan on spending
at least HALF A MILLION dollars to put and keep JFW for NT on
the market for just a two year period.
I'm almost done with this lesson, so bear with me just a bit longer.
Let's take the $400 marketing and $300 support costs out of the
current $1,500 price for JFW for NT. (1500 minus 400 minus 300
equals 800). That leaves $800 per copy to be applied to the
$660,000 figure.
Dividing 800 into 660,000 gives 825. So if my estimates are
anywhere realistic, it means that HJ has to sell 825 copies of JFW
for NT within the first two years just to break even.
There's even more. We've talked about paying interest on borrowed money,
but we haven't talked about profit. You have to plan for profit.
If you plan to break even, you'll lose money, gauranteed. Call it
a "fudge factor" or a "buffer", but you have to plan that "extra" because
life doesn't always go as planned.
So let's round it up. To set a goal that will allow at least some
profit, (and how to realistically determine that is another treatise that
I won't bore you with), let's say selling 1000 copies is the goal for
the first two years.
Someone who recently purchased JFW for 95 look at their serial number.
That gives you an idea of how many copies of JFW (all versions)
are out there. Now consider how much smaller sales of JFW for NT
are going to be compared to all the other versions.
My guess is that it has been and will be a real challenge for HJ
to sell 1000 copies of JFW for NT during the first two years of
that product's life. Also keep in mind that any large purchasers,
such as a government agency, are going to want a substantial discount.
So taking discounted government sales into account, the goal needs
to be at least 1200.
The real amazing thing is not that JFW for NT costs so much. The
truely amazing thing, and big credit to HJ, is that JFW for 95 costs
so LITTLE!
End of lesson.
At 01:56 AM 1/9/1999 -0600, you wrote:
>This is a direct result of hj having a monopoly on screen reading in
>win-nt. When the rest catch up the price will come down.
>
>At 07:24 PM 1/8/99 -0700, you wrote:
>>Well we don't have to worry about HJ reducing their price! I am sorry that
>>people feel they are being blacked mailed if they talk about this topic.
>>What disturbes me the most is that JFW NT is twice the price of JFW 3.2 with
>>the only difference being the access key. Dick AB7HW and Scotty the wonder
>>Guide Dog.
>>
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