Re: OT: Software Licensing Fees
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 p...@cactusfamily.com mailto:p...@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 --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us mailto:PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss --- PLUG-discuss mailing list -PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss
Re: OT: Software Licensing Fees
Andrew makes a good point of things must be win-win. Sounds like they are not. If the business is not viable, it may be time to cut your losses. A sad fact, however this decision is the harsh reality of being in business. It does sound like the business is hanging in there though. Might be a good time to re-negotiate a more limited relationship. From what you are saying you are not that easily replaced - from a financial perspective. Of course you will have to take into consideration what your desired compensation is. I would guess the business owner knows things are not as good as they could be for all involved. Maybe if you start by educating the business owner about your current compensation level, market compensation for a PHP consultant, you being at risk, etc, and then ask how to make this arrangement win-win, you might be surprised at what might be offered. Keith Smith --- On Mon, 7/9/12, AZ Pete p...@cactusfamily.com wrote: From: AZ Pete p...@cactusfamily.com Subject: Re: OT: Software Licensing Fees To: Main PLUG discussion list plug-discuss@lists.plug.phoenix.az.us Date: Monday, July 9, 2012, 11:52 PM 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 p...@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
RE: OT: Software Licensing Fees
Yeah, I feel your pain, but more than you know - I did a fixed bid deal many years ago and quit keeping track of my hours when I reached the wonderful rate of $1/hour. Yep. $1/hour. Yes, that was 20 years ago, but I had much more work to do on a fixed bid job, so it went below that amount Rusty -Original Message- ...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. --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss
Re: OT: Software Licensing Fees
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 j...@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 p...@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 p...@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
Re: OT: Software Licensing Fees
The issue (I) see is this: Do you have a written contract? If so, what is WRITTEN is binding. I see the _possibility_ of all kinds of LEGAL troubles. Suppose: You say Goodbye, The company dies, He sues you for breach of contract... and wins. OH NOES! On the other hand, I believe verbal agreements rarely hold up in court. BEFORE you make any large decision in this matter it may be prudent to speak with a lawyer. As we all know, The U.S. is the MOST litigious nation on earth You have already made the statement that if he were to pay you the going rate it would kill the business. Over the years, the company's revenue has increased the owner must keep lowering bids each year to get a contract In essence you are saying that a theoretical maximum increase of costs of $31,200 would kill the business, (Double the IT cost at full time (2080 Hrs/yr), MUCH less if you work a few hours a week for him. NO owner would willingly cut his own throat. So, a raise appears to me to be out of the question. Point here now becomes: Is this revenue stream large enough to put a dent in YOUR wallet should it stop? With the economy as it is, I'd look hard at that. Do you have MARKET RATE work to fill in the gap LONG TERM? Since the relationship is good, you need to weight THAT too. Does that relationship bring work in via referrals etc? Would severing the relationship harm your other existing streams OR hurt your ability to create more streams? Is the RELATIONSHIP important to you? Sometimes it is about more than just money. Add that you said, you are replaceable AND that if you walk, you will effectively slit HIS throat. NOTHING will divide family/ friends/ relationships faster that money based issues. I have personally witnessed a older friend lose a lifelong friend since they were both 5 years old and end up not speaking... permanently due to arguments regarding money. Hope I've helped :-) Wayne 07/10/2012 05:41 AM, keith smith wrote: Andrew makes a good point of things must be win-win. Sounds like they are not. If the business is not viable, it may be time to cut your losses. A sad fact, however this decision is the harsh reality of being in business. It does sound like the business is hanging in there though. Might be a good time to re-negotiate a more limited relationship. From what you are saying you are not that easily replaced - from a financial perspective. Of course you will have to take into consideration what your desired compensation is. I would guess the business owner knows things are not as good as they could be for all involved. Maybe if you start by educating the business owner about your current compensation level, market compensation for a PHP consultant, you being at risk, etc, and then ask how to make this arrangement win-win, you might be surprised at what might be offered. Keith Smith --- On *Mon, 7/9/12, AZ Pete /p...@cactusfamily.com/* wrote: From: AZ Pete p...@cactusfamily.com Subject: Re: OT: Software Licensing Fees To: Main PLUG discussion list plug-discuss@lists.plug.phoenix.az.us Date: Monday, July 9, 2012, 11:52 PM 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
Re: OT: Software Licensing Fees
I agree with most of the comments here. However regarding contracts, I won't tell you not to check with an attorney however that can get really expensive for $15 /hr.worth of programing work. If you have a written contract with the business and it does not a have any recitals in it that require you to pay THEIR attorney fees for any disputes (that they win) then it will also cost them as much or more to take you to court and with the chance that they do not win. In this case you would have as much or more leverage in the contract as them. As a senior manager I have seen a lot of contracts and NO contract even if it is written can force unfair business practices on another entity. Even if your contract stated that you must maintain the software forever this would not meet any legal nexus today. I say agree to maintain the software only and as others have stated maximize/automate your maintenance to get your dollars/hr back to where you are comfortable with the time spent. Any new features aught to be re-negotiated based on a cost/benefit analysis to them that is inline with your rates and expenses. If you are doing a lot of this work (for others) it may make sense to form and LLC and move your work under this protection. I would talk to an attorney about forming an LLC and moving my work into it. -- James --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss
Re: OT: Software Licensing Fees
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 p...@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 --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss --- PLUG-discuss mailing list - PLUG-discuss@lists.plug.phoenix.az.us To subscribe, unsubscribe, or to change your mail settings: http://lists.PLUG.phoenix.az.us/mailman/listinfo/plug-discuss
