Board index » delphi » Advice for pricing support contracts

2006-07-27 11:38:28 AM
delphi84
I'm about to embark on a little contract to produce an application (Delphi -
Win32) that will control a production line for a very large U.S.
corporation. I am expecting it to take less than 2 months. The software will
be used in a facility in Mexico while I am based in Canada.
I've been asked to provide details and pricing for an annual support
contract. I am not used to doing contracts for support and my customers are
generally happy to simply be billed by the hour. I am a little concerned
about giving a price for this since for all I know, there could be a huge
turn-over in personel on the line and language could be a problem too. This
appears to be the last issue before getting a P.O. so I don't want to simply
throw an unreasonable figure at it either.
What's a common answer for this type of request? How do I arrive at a figure
or are there alternatives?
--
Jim Rowell
 

"Jim Rowell" <XXXX@XXXXX.COM>writes
buy software unless you agree to charge them every year for support, whether
they need it or not. I am sure the % varies by industry, but we've charged
anywhere from 17% to 26% per year. We've actually bumped up the % as we
bumped down the price of the software. Throw out a high number and let them
whittle it down a little and they'll luv ya.
 

RHR writes:
 

"Jim Rowell" <XXXX@XXXXX.COM>writes
In answer to your specific question, we provide "unlimited" phone support
though we expect the customer to channel questions through their own support
contact rather than every end user calling. That will reduce the call
volume significantly and is important when large installations are involved.
In no time at all their support contact will hear the FAQ's and won't need
to call you because they already know the answer. it is also sort of
important to have a product that doesn't generate a lot of support calls!
In truth, we have a lot of customers for whom we take calls directly because
there just aren't that many.
To us, "support/maintenance" covers things the customer has no control over,
along with upgrades. Examples: If regulations change we make changes to
accomodate the reg at no charge. However, if a customer wants a change
because they're making a decision to change their own product line or some
other issue under their control we charge.
Dan
 

"Jim Rowell" <XXXX@XXXXX.COM>writes
virtually zero maintenance calls. So, basically, they get peace of mind and
free upgrades.
 

BTW, our maintenance contract guarantees that our product is not perfect
(it's AI stuff), and that we have no obligation to fix inaccuracies. In
practice, we release accuracy/performance/feature upgrades quarterly. But
it's important to set expectations up front (" we guarantee imperfections in
the results of the component").
 

BTW, never underprice software to big companies. To a large extent, they
measure quality by price. Our original AI product had a price of $1,000.
No buyers. Raised the price to $25,000. Got buyers. Eventually sold
copies for $100k and more. NEVER underprice; you can always allow them to
whittle you down.
 

Dan Barclay writes:
that!
I suppose if it becomes a problem, a prepared FAQ would actually be a great
idea for the contact person to have.
There can be a lot of issues since we are dealing with a huge amount of
various pieces of hardware and when anything goes wrong/not setup
properly/not used correctly/not understood..... the software gets blamed
first. <g>
I try very hard to write software that is intuitive and doesn't throw
roadblocks at the user. Nonetheless, few people seem inclined to even press
F1 when they get stuck.
hardware setup to shipping label creation to db maintenance. Basic "how-to"
in other words. I doubt there would be a need for upgrades except to address
bugs or customer requests. I'd say the customer has full control over
not wanting to read the manual <g>but I assume you would accept calls like
that under your normal contract?
--
Jim Rowell
 

RHR writes:
 

"Jim Rowell" <XXXX@XXXXX.COM>writes
expect to run into much of the time. If it were going to be easy to create
a "cookie cutter" solution some major software house would be doing it.
reliable recurring revenue for a healthy business. If you keep updating
your product so that your customer is taken care of, you will effectively be
reselling the software every 5 years with a support contract in the 20%
range.
So long as MS controls the desktop you will end up with a platform change
every few years anyway<g>.
answer all the questions. I was talking about what gets charged in updates
or changes.
Dan
 

"Jim Rowell" <XXXX@XXXXX.COM>writes
You can not be stupid about it, but don't underprice. If you do you won't
last long,
You need to have a good appreciation for what the software is worth to the
customer. The term I was taught in a previous life is "Value In Use". I'd
suggest you price so that you just get a portion of that. If getting a
portion of that makes you money you have a product. If it doesn't, don't
bother charging more than it is worth to them because you don't have a
product in the long run.
Dan
 

Jim Rowell writes:
Long response since I may not have time to think about this again.
Is this a real time system, data collection scheduling or all-in? It
seems a little tight... But maybe you have an application mostly built!
The type of system _exactly_ would greatly influence my response --
having designed and supported these systems.
turnover and build it in to your pricing. If they tell you otherwise --
come for a look and see what you think. Make sure you have your own
translator and do a little spying on the corporation. This is not an
evil suggestion -- just a friendly reminder to think about what you are
truly getting into!
A lot of things here run on personal relationships. Canadian or American
ownership _should_ change that. But, if the plant manager is a Mexican
only some experience will tell the tale. Having said that, most of my
dealings have been with honourable people and very enjoyable -- but the
rest make up for the good ones -- in spades!!! According to some local
people I know, even Canadian and American plant owners have been known
to abuse their employees... for what it is worth. Hence the high turnover
rate...
Specify the legal system under which the contract will be viewed.
Second, American contracts require a pre-amble as there is no "common
law" system. If you do not understand this last comment seek legal advice!!!
Most really lucrative deals are done on a quick verbal exchange or maybe
a handshake if it is formal -- but only because there is already a lot
of history. Relationships build slowly here unless there is a well known
and very firm financial footing. Most everything here is cash/cheque.
negotiate -- so...
This is something I wouldn't normally comment on -- but you have left
all kinds of clues about your doubts on this contract...
In the end it is simply an agreed upon number.
Speaking from some experience the language barrier will be an issue
regardless of what you are told. People here often _think_ they
understand each other. Not unlike English and Canadian (or other
Colonials) conversations where you really think you might be missing a
point... The words are the same but they mean different things in
different cultures.
There are compensations.
Somebody else gave some numbers -- they are as good as any.
Oh yeah -- real time Internet access can suck real bad all over this
country. So... on-line help may or may not be effective. The ability to
help your customer may be severely limited by circumstances completely
out of your control. And a visit may be necessary... Plan for it.
In closing -- you have provided precious little information to help you
set a price for support. Probably because you don't have any idea of
what you need to know to cope with this country! And it is highly
unlikely the customer will educate you -- because your ignorance will
assist in their cost containment? Why do I say this? Because there is
lots of local talent -- highly capable -- begging for work. I am sure
there is a reason they are not being used.
I am not guessing on this stuff... :-) A bit of experience -- and yes I
could write a book about it and probably will. :-)
Best wishes! My email is a throw-away -- if you want to talk it can be
arranged though.
--
Will R
 

Dan Barclay writes:
thinks they are)?
One or two - ok, but if you get many calls like that?
--
Ingvar Nilsen
www.ingvarius.com
 

WillR writes:
scanners, order planners, etc. Nothing too special. I do have the hard parts
already built. it is more of a customization thing.
that this project will operate in Mexico so the support calls would come
from there.
person remains stable but the opposite could also happen. I don't have the
free time for a site visit. I will assume a high turnover rate.
particular job. Good to understand a bit about things there though because I
often get secondary work from sites.
must work by the deadline or else. There is no being late. Industrial can be
like that. I mean, the end-user will have allocated resources and
floor-space and put their own schedules into place based on the deadline.
It's just that I hate it when my end of the stick seems to be missing parts.
<g>
as unreasonable. <G>
<snipped other good points>
Thanks for you comments. They've helped a lot.
--
Jim Rowell
 

They asked if I could manage to use the number "0". /That/ seems to
qualify as unreasonable. <G>
I would say it was very reasonable. Work out what you think would be
a fair quote for a locally based company - and then use that "0". Use
it by adding it to the end of the quote. You might need to use 2 of
them, if the first concatenation comes to less than twice the airfare.