Mark,

I agree and disagree.

From the standpoint that my firm develops software and process tools for our
work, I admit we try to get development costs covered (for the most part) by
the client for whom the tool/procedure is initially developed, generally at
a fixed price.

But we do not always to that.  We often see the inherent value in something
we are developing for a client or a specific client's project.  In those
situations, we may increase (maybe even double) the amount of time and
resources we put into it's development knowing that the returns will be that
much greater.  The product is then sold many times in the years to come.  So
in that situation, the first or second sale (at a fixed price based on the
type of product and its generic usefulness) should cover the development.
Then, future sales cover upgrades and enhancements, which may or may not be
provided to clients with older versions.  In that light, I would think
tiered pricing on softwares is inappropriate.

That, however, brings up the place where "tiered pricing" is appropriate:
software maintenance.  If a firm exists exclusively to develop, market, sell
and support a software, the most expensive portion of that process is
usually the support.  The opportunity cost of doing business is the cost of
initial software development and probably the next two or three releases.
Once that is put to bed, the amount of money that is put out on the software
is not finding and fixing bugs, but rather modifying the software to have
new functionality or getting it to continue to function well while the
environment in which it runs changes over time.  In other words, the expense
is for supporting clients who have already bought the product, and are
expecting more work for little or no more money

That requires a good level of resources be kept on hand, with diminishing
expectations for income on the product.  Worse yet, if a client has a
989-450 running your software in batch mode hundreds of times a day, they
will (statistically speaking) encounter more problems with the software, and
need more of your technical resources than a client running the software six
times a day on a 937.  There exists a proportional relationship between the
size and power of a client's cpu and the demand on a software vendor's
resources; and is fair that support costs should be tiered accordingly.

As a side note, we have only one product for which we charge support and
that number is based on the number of machines they are driving with our
software, not the cpu series being used for the process.   Nonetheless, the
more devices being driven determines the support cost.  Simply put, the more
work they are expecting from the software, the more work they will
eventually get from us, and they more money we want from them each
month/quarter.

Rs~
Russ Smith, Systems Consultant
Problem Solved, Vacaville, CA
r s m i t h @ c u - h e l p . c o m
h p 3 k - l @ e - 3 0 0 0 . n e t


----- Original Message -----
From: "Mark Boyd" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Monday, April 03, 2000 9:53 AM
Subject: Re: [HP3000-L] Orbit Software


> I don't see how it can be legal.  Next to politics, tiered pricing is the
> biggest scam in this industry.
>
>
> -----Original Message-----
> From: Joseph Rosenblatt [mailto:[log in to unmask]]
> Sent: Monday, April 03, 2000 9:23 AM
> To: [log in to unmask]
> Subject: Orbit Software
>
> Cynthia fowler wrote:
> >Speaking from experience with ORBiT, they hit us for $30,000 in upgrade
> fees going from a 987/200SX box to a 979KS400 box. We dropped the product
> and now use HP TurboStore True Online 7x24.
>
> I know nothing of the Orbit product but I can tell you that $30,000 is
less
> than I was charged for a RoadRunner upgrade.
> I am also intrigued by the *free* switch to TurboStore Online 7X24. Is
that
> now free with the FOS?
>