C
On June 20, 2003, Bob Pawley wrote:
> If the integrators own the code what's to stop them from charging the client
> ongoing licensing fees as do all proprietary software vendors? <
That happens all the time. If the integrator charges licensing fees, then he/she *is* (by definition) a proprietary software vendor.
A lot of integrators do cookie-cutter applications, building the same thing only different for a lot of different clients. Over time, the integrator amasses a body of expertise and builds a set of tools - or a complete application. Typically, the integrator retains the rights to the software, and charges each client a one-time non-exclusive license for installation, plus consulting fees for installation, configuration, customization, training, etc. (Actually, they usually just bid the job at some fixed lump sum - you don't necessarily know how they arrived at the number - but the software license specifies that they retain ownership.) The continuing revenue stream comes, not from yearly license fees, but from maintenance and support contracts.
When a client-specified customization is generally useful, and developed under a contract that lets the integrator re-use the code, the enhancements get folded back into the toolkit. (Of course, the client has the right to insist that the customization NOT be used elsewhere, but he can expect to pay significantly more for it.) If a customization is more work than a single client is willing to pay for, sometimes a User's Group will band together to fund the work jointly. And sometimes the integrator just has to develop an enhancement on his own nickel to stay competitive.
> If he wanted the right to resell
> for his profit I would expect that our deal would involve very favorable
> terms for me. <
That happens, too. The initial beta site for proprietary software very often gets favorable terms. Some of those terms can include reduced licensing costs and very high levels of support.
Another favorable term, less often explicitly stated but often the real reason for the deal, is that the initial customer gets a very large say in how the system works, and an uncommonly detailed knowledge of its inner workings. Subsequent licensees, on the other hand, get a packaged product that does what it does, and what they know about how it works is pretty much whatever the documentation says.
The initial client may pay a license fee lower than what subsequent customers will pay, but commits to providing significant effort to testing and bug reporting, and to putting up with frequent code changes and other interruptions. In the end (assuming a successful project), the initial client get what amounts to a custom application, but supported by the manufacturer as if it were a warranted product, with continuing development, bug fixes and feature enhancements.
If you're not the initial client, then you get the benefit of licensing code that the integrator can customize to your needs, but which has already undergone significant development, testing, and debugging.
That the integrator makes money on the same code more than once shouldn't be a problem for you, as long as the money (and other resources) you are asked to pay isn't more than the solution you get is worth to you.
My two cents,
Greg Goodman
Chiron Consulting
( Previous thread: http://www.control.com/1026171803/index_html
- Moderator )
> If the integrators own the code what's to stop them from charging the client
> ongoing licensing fees as do all proprietary software vendors? <
That happens all the time. If the integrator charges licensing fees, then he/she *is* (by definition) a proprietary software vendor.
A lot of integrators do cookie-cutter applications, building the same thing only different for a lot of different clients. Over time, the integrator amasses a body of expertise and builds a set of tools - or a complete application. Typically, the integrator retains the rights to the software, and charges each client a one-time non-exclusive license for installation, plus consulting fees for installation, configuration, customization, training, etc. (Actually, they usually just bid the job at some fixed lump sum - you don't necessarily know how they arrived at the number - but the software license specifies that they retain ownership.) The continuing revenue stream comes, not from yearly license fees, but from maintenance and support contracts.
When a client-specified customization is generally useful, and developed under a contract that lets the integrator re-use the code, the enhancements get folded back into the toolkit. (Of course, the client has the right to insist that the customization NOT be used elsewhere, but he can expect to pay significantly more for it.) If a customization is more work than a single client is willing to pay for, sometimes a User's Group will band together to fund the work jointly. And sometimes the integrator just has to develop an enhancement on his own nickel to stay competitive.
> If he wanted the right to resell
> for his profit I would expect that our deal would involve very favorable
> terms for me. <
That happens, too. The initial beta site for proprietary software very often gets favorable terms. Some of those terms can include reduced licensing costs and very high levels of support.
Another favorable term, less often explicitly stated but often the real reason for the deal, is that the initial customer gets a very large say in how the system works, and an uncommonly detailed knowledge of its inner workings. Subsequent licensees, on the other hand, get a packaged product that does what it does, and what they know about how it works is pretty much whatever the documentation says.
The initial client may pay a license fee lower than what subsequent customers will pay, but commits to providing significant effort to testing and bug reporting, and to putting up with frequent code changes and other interruptions. In the end (assuming a successful project), the initial client get what amounts to a custom application, but supported by the manufacturer as if it were a warranted product, with continuing development, bug fixes and feature enhancements.
If you're not the initial client, then you get the benefit of licensing code that the integrator can customize to your needs, but which has already undergone significant development, testing, and debugging.
That the integrator makes money on the same code more than once shouldn't be a problem for you, as long as the money (and other resources) you are asked to pay isn't more than the solution you get is worth to you.
My two cents,
Greg Goodman
Chiron Consulting
( Previous thread: http://www.control.com/1026171803/index_html
- Moderator )