Dave, you are absolutely 100 percent dead center on target! I t is
refreshing to see someone here has a realistic understanding of what is
involved in a project like developing a piece of software for such a
limited market, relatively speaking, such as JFW Nt. I suspect your
figures were even a little conservative.
Ron Milliman
Professor of Marketing, Western Kentucky University
CEO: A3 Business Solutions, Inc.
http://www.a3solutions.com
http://www.regionalmalls.com
At 12:40 PM 1/9/99 -0500, you wrote:
>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.
>>>
>
>
>-
>Visit the jfw ml web page: http://yoyo.cc.monash.edu.au/~nallan/jfw
>
>
-
Visit the jfw ml web page: http://yoyo.cc.monash.edu.au/~nallan/jfw
