Thought - How do you Price/License your software

You are a developer, you create apps, software for a a living or for a company that makes a living off your work. The question (kind of a poll) is how do you price it and license it? Given that there are so many different models in the market for the same and also given that there is a marked difference between manufacturing costs.

First let us look at Hardware, say look at the Car Manufacturer BMW, They spend millions of Euros on R&D to achieve exceptional outcomes for their customers, like a few other manufacturers, they had ABS, CBC, Xenon Lighting (The ones that many complained about looking like a flashing cop car on roads that had dips every so often and brought white headlights), headlight beam spread, rear parking sensor, folding metal to crumple in a crash, etc, etc. Apart from all of this they also introduced many software related features like the iDrive, the Keyless entry, on Key vehicle data, key readers, etc. Then there is the cost of manufacturing, where the best materials are used (which obviously cost). So at the end of the process, we get a product ready for consumption and there are profit margins on the manufacturing cost, plus the dealer markups and the cost of transportation, etc. The product costs the end user $X (whatever that is in the local currency).

Let's also look at another hardware manufacturer, Apple. They spend a lot of time and money on R&D, create the thinnest design, faster and smaller mobile CPU, etc. (There was a time when Intel was considered the master in this field) Then there is the manufacturing cost, shipment, while Apple is quite strict about their pricing and margins, etc. There is not much (or at least we are made to believe). So at the end we get an Apple product that is of quality and costs a standard cost across the world.

The Issue
You just purchased a product, say the new iPad (iPad3) and within 2 months Apple release a new iPad (iPad4) with bumped up specs. Because it is hardware, you cannot simply upgrade it to the latest specs, nor can you expect Apple or the dealer to replace it for the new model. However, in the case of a BMW, many are happy to pick up a demonstrator vehicle (it is not exactly a Used Vehicle, nor is it a brand new vehicle) Something like the On-Display model (and manufacturers promote the use of many products as demonstrators, specially in the case of cars and subsidise the costs to a large extent).

This is fine, but what happens in the case when you had just purchased an iPad1 about a year ago and now it is no longer supported by the new updated version of iOS. In an automobile analogy, that is like the 2009 model will no longer run as the road has been upgraded and will only support models 2010 and later. Imagine that, what about that Classic Fiat Issetta parked in your garage? Imagine if it cannot be used on the roads anymore (some will be glad to not have ancient or older vehicles breaking down or leaking oil, etc)

Lets look at the same in terms of Software. First lets look at the different type of licensing available.

One time purchase
One time with Updates
One time with Updates and Support
Annual Cost

In the early days, i.e. 1990's software had establish and stabalized as an industry and people could buy software off the shelf or from magazines. Every type of magazine used to have ads for software on that topic. There was software to calculate and run simulations for chemistry, physics, run a business, crunch numbers, make presentations, etc. These were available for a low one time price of $X. The market was so saturated with so many software competing in the same area that people started distributing demos and some came up with the brilliant concept of shareware, in many ways a demo that was not crippled. Some software that were priced very high were offered on installments and/or leased on an annual basis instead of collecting the large sums upfront.

Fast Forward to current day, the reasons are forgotten on why there were licenses and why a particular type of license. Mainly this carries forward from those that come from larger companies, they are aware that these companies charged huge obscene amounts from their clients and now that they have their own setups/startups they must too. I must say that prior to Adobe Acrobat 5, I had seen people using a copy that fell off the back of a truck. My first Adobe Acrobat purchase was Acrobat 5.0 prior to that I did not need to create PDF files and the reader was free anyways. The other versions till about Acrobat 9 were provided by the workplace (some advantages of being in an university environment and/or being an academic). One of the main feature expected of Acrobat was not to create PDF files alone, for that Macs have a built in PDF functionality and CUPS-PDF does a good job too. Windows does fine with CutePDF writer and other such free utils. The main reason of Acrobat was to manipulate the PDF, which till date is not done very well. Still you are expected to upgrade your software because the older version does not work with the new Hardware or still does not give you all of the features that you really wanted from the software. The latest version of Acrobat XI is for > $630 AUD!!

Look at the licensing for most of the development frameworks, all have an annual license. While most of them offer you the offline compiler, you can work with the older version and not avail of the bug-fixes and cool functionality (Service packs in Microsoft-esque speak) while some give you nothing, you leasing the software from them for a year and then it just stops working, leaving you out in the cold with nothing.

Around absolutely late 90's and early 2000's when Microsoft released their Mobile Operating System, PocketPC 2000 with hardware from Compaq, the updates (ROMS) were purchasable. You could buy these and upgrade your device to the latest version. Similar to Microsoft selling Windows 3.x -> Windows 95 -> Windows 98 -> Windows ME -> Windows 2000. They wanted to charge for every update they had, while in many ways the ROMS were not an entirely new system but a Service Pack/Patch. Microsoft were not the only ones, When the first gen iPods were released, the one with the Corinne Bailey Rae covers, then followed by the Macy Gray and then John Lennon. The first two did not have Google Maps and did not connect to encrypted wireless networks and many more issues, at the time Apple offered an update to the iOS software for a fee where the Google Maps could be added to the devices. Now updates are generally Free for all device owners.

On the other hand, While there are a lot of Service Packs(Windows) and System Updates(Mac OSX) still on and off they release a newer version every so often and charge the users for it.

Be it the large corporations like Apple, Microsoft, HP, Adobe, etc or be it the smaller organizations and Indie developers, development equates to costs. The costs of hardware, software, time and knowledge which are then transferred into a product - the software. This software is then purchased by customers. To be able to provide some kind of continuous development and support, they need to retain the development teams, spend time on the same, etc. All of which comes down to CO$T$ and it is difficult to keep the meter running.

But is it justified like in the case of Apple to change the connectors to a completely non-standard one and then charge $25 for an adapter or an additional USB cable. This should have been provided for free to every one that brought the new iPhone5 or the new iPad (iPad4). When is enough - enough? Older Hardware cost a lot and while they still work, newer devices have no place for them. Like the new iMacs will not have a CD/DVD drive, I recollect paying a lot for the SCSI devices and adaptors, paying a lot for the Dazzle Movie Convertor DVCII around 2001 it allowed to capture the footage from an analog source and make VCD and DVD quality movies (DVD writers were just becoming affordable) It required an empty PCI Slot in the Tower and had an external device connecting to the analog RCA cables. Updates were not easy and with an upgrade to Windows XP it did not work and I had to provide proof of purchase before I could download the software, which was offered as a download of some 100 MB's at the time when most of the world was on 44Kbps dial-up and expensive Internet with low quotas.

Should hardware become obsolete within 2 years, if so then should they be priced as high as they are? Should all disposable hardware not be priced at < $200 so that the next version is purchased in the coming year when the new version is released? I recollect some of the Nokia phones I had, they lasted a lifetime.

So back to the point of this thought/article, When is the software considered as complete? Should bug fixes irrespective of the period of the license be included and provided to the customers irrespective of their support license validity, should you get something tangible when you pay? Should a newer version released within 1 year or a set period be considered as a new version or an update and be offered for free? Or should many companies employ licenses like Moai and offer the framework as open source or on the other hand like some other that take open source source software, make it closed source and offer it for a fee.

Should the software upgrades last the hardware life, i.e. all updates be offered until it cannot be supported for that platform. Like older Mac software that ran with Rosetta, which now cannot be used at all. However, with VMWare, Virtual Box or VirtualPC you can run older versions of windows (including windows 3.1 and older DOS versions) to run some of the older legacy software (if you can get them off the 5¼ or the 3½ disks they came on originally or from many sites offering abandonware and older legacy software - check for legality of the software)

Why should we as a consumer accept paying for a new Hardware every 6 months and a new software version? Why should hardware become obsolete within 6m to 1 year? It is not like they come in a cracker box or with breakfast cereals.

How do you price your software and what kind of license do you employ for your products?


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