Anyone with experience selling software to organisations?

[Singularity73]

Hi,
Someone has approached me from a large organisation and asking about using my web application in a corporate setting. They want to be able to use it having the data stored within the organisation so they can use proprietary content in the app.

I was thinking of selling a copy of the application (as in give them all the code under some T&C's) which they can setup themselves as I think this would be easier (for me anyway haha), but honestly I have no idea if this is the right move and how to proceed. I think it would be good to integrate some kind of 12-month key that they have to pay each year to renew, but I'm just throwing ideas out.

My app currently uses a 3-tier architecture: PHP backend, MySQL database and client-side JavaScript. However, what complicates things a bit more is I've been working on a new version (which is a lot better) which uses a new stack of technologies (Node.js) and would require a completely different setup so I think they would need to wait for this version to be released.

I have absolutely no experience setting up internal software for companies or whatever this requires and I'm wondering if anyone on here has done a similar thing and is willing to share their advice? I just have no idea what I'm doing and need some guidance xD

Side note: I'm still at uni as well, which is a right pain. Considering dropping out and pursuing this full-time if I can persuade my parents, but that's a topic for another post.

Any help would be greatly appreciated.

Thanks

Tim

 

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[Simon G]

I have not sold software as a private person to organizations, but have long experience in working as a software developer and related roles, also participating in licensing decisions both as seller as a buyer. My advice is to prepare a few packages consisting of following components:

1) The software itself (with or without source)
2) Documentation (for internal support and/or end users)
3) Support (think about reaction times, pricing, how many hours per month/year etc.)
4) Training (e.g. 4-hour training for support staff, 4-hour training for end users)
5) Updates

You could, for example offer these three packages. The client has maybe something else in mind, but they serve as a nice conversation starter.
1) Software without right to modify, documentation, 4 hours of support per month, no training, 12 months updates for n $
2) Software without right to modify, documentation, 8 hours of support per month, one day of initial training, 12 months updates for 1.2 x n $
3) Software with right to modify, documentation, 16 hours of support per month, two days of initial training, 12 months updates for 2 x n $

When drafting a license agreement, you should make clauses for
a) where the software may be used (e.g. restrict the use for the particular company)
b) prohibition of reverse engineering if you don't want the client to modify your software
c) warranty, restriction of your liabilities
d) redistribution rights (you probably want none)
e) intellectual property rights
Disclaimer: this is no legal advice.

According to my experience, corporate clients often conveniently forget to renew licenses (often if someone notices the license expired, he doesn't care enough to tell somebody in charge of that) so I suggest using some mechanism to prevent that (without irritating the client).

 

[Singularity73]

I have not sold software as a private person to organizations, but have long experience in working as a software developer and related roles, also participating in licensing decisions both as seller as a buyer. My advice is to prepare a few packages consisting of following components:

1) The software itself (with or without source)
2) Documentation (for internal support and/or end users)
3) Support (think about reaction times, pricing, how many hours per month/year etc.)
4) Training (e.g. 4-hour training for support staff, 4-hour training for end users)
5) Updates

You could, for example offer these three packages. The client has maybe something else in mind, but they serve as a nice conversation starter.
1) Software without right to modify, documentation, 4 hours of support per month, no training, 12 months updates for n $
2) Software without right to modify, documentation, 8 hours of support per month, one day of initial training, 12 months updates for 1.2 x n $
3) Software with right to modify, documentation, 16 hours of support per month, two days of initial training, 12 months updates for 2 x n $

When drafting a license agreement, you should make clauses for
a) where the software may be used (e.g. restrict the use for the particular company)
b) prohibition of reverse engineering if you don't want the client to modify your software
c) warranty, restriction of your liabilities
d) redistribution rights (you probably want none)
e) intellectual property rights
Disclaimer: this is no legal advice.

According to my experience, corporate clients often conveniently forget to renew licenses (often if someone notices the license expired, he doesn't care enough to tell somebody in charge of that) so I suggest using some mechanism to prevent that (without irritating the client).

Thanks for the advice Simon. Got some more questions

1). Will I have to find a lawyer to help me create the license agreement? If so, any advice how you find lawyers who aren't super expensive, I'm a student with little money...
2). Is it okay to just give them the software code and their IT department can set it up themselves? Or do I need to create some instructions of how to do it, or do I do it myself for them somehow?
3). Should the licence key automatically renew after 12 months, so they keep paying, or should it just stop working after 12 months and they have to manually renew it?

Sorry for all the questions haha

 

[OlivierMo]

Thanks for the advice Simon. Got some more questions

1). Will I have to find a lawyer to help me create the license agreement? If so, any advice how you find lawyers who aren't super expensive, I'm a student with little money...
2). Is it okay to just give them the software code and their IT department can set it up themselves? Or do I need to create some instructions of how to do it, or do I do it myself for them somehow?
3). Should the licence key automatically renew after 12 months, so they keep paying, or should it just stop working after 12 months and they have to manually renew it?

Sorry for all the questions haha

I don't know if it's possible in Node.js but I wouldn't ship any code that can be tweaked easily to skip the license. Even if you have a license, I'm sure it's easy to hack some JS code to unblock the software. That's me, I'm paranoid when it comes to IP theft.

If you have an annual license I assume the license should be checked against or server or you can encrypt some license file with a timestamp.

Your software should be as easy to install as it can be. To me it's part of the user experience.

 

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[Simon G]

1). Will I have to find a lawyer to help me create the license agreement? If so, any advice how you find lawyers who aren't super expensive, I'm a student with little money...

Personally, I wouldn't get a lawyer, although I'm sure many people disagree with me. This depends also largely on the country your operating in. Just study other license agreements, read about the subject and try to make the license agreement as suitable for your purposes as possible. Most probably this will be enough, and when not, it will be learning experience.

2). Is it okay to just give them the software code and their IT department can set it up themselves? Or do I need to create some instructions of how to do it, or do I do it myself for them somehow?

You should create instructions and also be available for support when it's installed (at least remote). You can also offer to install it yourself for a fee.

3). Should the licence key automatically renew after 12 months, so they keep paying, or should it just stop working after 12 months and they have to manually renew it?

I'd set up the license agreement to renew automatically after 12 months, if not cancelled. This ensures a continuous stream of income for you. Also some kind of phone-home mechanism to inform you about the usage would be good, so that you can detect unlicensed installations or usage after the license has expired.

 

[Singularity73]

I don't know if it's possible in Node.js but I wouldn't ship any code that can be tweaked easily to skip the license. Even if you have a license, I'm sure it's easy to hack some JS code to unblock the software. That's me, I'm paranoid when it comes to IP theft.

If you have an annual license I assume the license should be checked against or server or you can encrypt some license file with a timestamp.

Your software should be as easy to install as it can be. To me it's part of the user experience.

Yeah I'm not sure how I'd ensure they don't tamper with it.. I will have a look into licencing Node software to figure out how to do it securely.

 

[Singularity73]

Personally, I wouldn't get a lawyer, although I'm sure many people disagree with me. This depends also largely on the country your operating in. Just study other license agreements, read about the subject and try to make the license agreement as suitable for your purposes as possible. Most probably this will be enough, and when not, it will be learning experience.

You should create instructions and also be available for support when it's installed (at least remote). You can also offer to install it yourself for a fee.

I'd set up the license agreement to renew automatically after 12 months, if not cancelled. This ensures a continuous stream of income for you. Also some kind of phone-home mechanism to inform you about the usage would be good, so that you can detect unlicensed installations or usage after the license has expired.

Thanks, this is good information to start on!
I will schedule a call with the guy next week sometime and will post an update.

 

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[TreyAllDay]

Not sure exactly what the exact question was, however I license out all my software to organizations. I've done about $250k in sales in the last year - and I have always and WILL always go for the license/subscription model. The longer you can get them to commit the better.

I've honestly never had a lawyer review my terms, I studied others and wrote my own. I will eventually get these written by a lawyer but not this early.

I would keep some options for errors and omissions insurance in your back pocket, they may ask

 

[Singularity73]

Not sure exactly what the exact question was, however I license out all my software to organizations. I've done about $250k in sales in the last year - and I have always and WILL always go for the license/subscription model. The longer you can get them to commit the better.

I've honestly never had a lawyer review my terms, I studied others and wrote my own. I will eventually get these written by a lawyer but not this early.

I would keep some options for errors and omissions insurance in your back pocket, they may ask

Thanks for the response, yeah sorry if my question wasn't very clear, I'm just looking for general advice about this.

A 12-month subscription licence sounds most likely option I will go with.
$250K is a lot! How do you determine how much to charge the company? Or do you let them determine the amount by asking how much they're willing to pay?

I'm not sure if it would make sense to charge a lot of money, since my service can be used on the web for free or with premium features at $10 for a year, so they'd just be paying extra for the ability to use the software internally on their own servers. I'm not sure whether this justifies charging a lot of money for or not, I don't know how this is normally done.

 

[splok]

I'm not sure if it would make sense to charge a lot of money, since my service can be used on the web for free or with premium features at $10 for a year, so they'd just be paying extra for the ability to use the software internally on their own servers. I'm not sure whether this justifies charging a lot of money for or not, I don't know how this is normally done.

A lot of the cheap/free software people are used to using is only cheap if you're an individual. Start looking around at product details and terms and see how that changes for business/enterprise levels (probably with theoretically better support/redundancy/etc). Also, even if it's only $10, it should be $10 per year per seat, and depending on how specific the function is, the entire company might need seats. You really don't a 1000 person company to be able to just use a single $10 install of your software. Just think of how much time support requests could potentially eat.

 

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[JonnyC]

A 12-month subscription licence sounds most likely option I will go with.
$250K is a lot! How do you determine how much to charge the company? Or do you let them determine the amount by asking how much they're willing to pay?

A few ways I've dealt with to charge for on-premise software.

1. Straightforward, per server & per seat pricing. Example: your software needs to be installed on two machines locally and 300 people need regular access. You charge $5000 per year for each "instance" (aka server) and $10 per seat per month, so $120 per year. This would be $10,000 (servers) + $36,000 (seats) = $46,000 per year.
   
   
2. Value pricing. In "enterprise deals" where the per seat pricing makes the deal unworkable, ie. a company with 5000 users may not be willing to pay $600,000 per year for your software, then you can do "value based pricing."
   
   Basically your goal is to make a business case or ROI analysis a no-brainer for your point of contact to sell to his boss. Most of these deals aren't sold in a meeting with a vendor, but at an internal meeting with buy-in from several stakeholders who will be impacted by the decision to adopt the business software.
   
   How you do it: work out a "cost of doing nothing" through discovery calls with the business user and/or IT user. You ask them questions about how much time they're wasting on the business problem you're fixing. How often their shitty old software crashes, what each problem costs them in terms of time and money, so (hourly wage * 1.15 benefits/vacation/admin costs) * staff * time.
   
   Example: your contact tells you they have 500 analysts building spreadsheet models in Excel and it on average takes them 20 hours to do one model, and each analyst does one model per month: 500 analysts * 20 hours * 12 per year * $25 hourly labor cost = $3,000,000 per year business problem. You offer your software for $300,000 per year, discounted from the normal "retail pricing" of X, giving them a 10 times ROI and ~1.2 month payback period.

(source: I've sold software as a day job before, to enterprise and small businesses, for deal sizes from $20k to $400k)

I'm not sure if it would make sense to charge a lot of money, since my service can be used on the web for free or with premium features at $10 for a year, so they'd just be paying extra for the ability to use the software internally on their own servers. I'm not sure whether this justifies charging a lot of money for or not, I don't know how this is normally done.

Business software purchases suffer from hardcore information deficit, it's generally not as easy to compare solutions as with consumer products like through Amazon reviews. Buyers generally rely on case studies, discussions with the vendor, reference requests from past clients, etc. What justifies a purchase is value, if they think you can save them X for only a small fraction of X, they'll be happy to hand it over.

Think like a business, not like a consumer. Small % improvements in net margin for larger businesses can be huge in terms of absolute value. If you could improve General Electric's cost of revenue by 0.01%, you would save them $10.6M per year. Think they would mind handing you $1M per year for that?

Don't shortchange yourself or the value your solution is adding, if this company wanted to use the free service on the web, they would.

 

[TreyAllDay]

@TimTheCoder

Determining price has a few factors, but you always have to look at the competitors to get an idea - if you're charging WAY more than competitors you have to have a great service, because people DO price shop regardless of the type of purchase.

However, be careful going too low and competing on price - it has to work into your plan. You can start low to attract clients depending on your service, but in some cases people will think you're not as good because of your price. It's just trial, error, and testing.

To give you an example - we offer intranet (internal communications) software. We're probably half the cost of our larger competitors, but it's for a reason. Most of our competitors are a bit intimidating to start using, expensive, offer WAY more support than the average customer wants (implementation teams, sales reps to upsell you, etc) - so the service is really only available to larger companies who are rolling the software out as huge initiatives. I've found a niche of customers who want to pay less and do most of the rollout themselves, they can contact support when they need to. So for this reason, we charge less.

 

[Singularity73]

Thanks for the responses everyone. Think I have a better idea now, I'll let you know if I have anymore questions.

 

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