Software pricing: Is there a future?

In their angst to achieve a quick return on investment, many new software companies fail to thoroughly assess two key elements of any pricing strategy: support plans and future release strategy. If you decide to play Scarlett O'Hara and "think about that tomorrow", your company and its profitability are likely to be Gone With the Wind.

Have you ever wondered why so many software vendors seem to be limiting support beyond what was promised in the warranty? The reason is often purely financial. No one really analyzed just how much resource would be required to support the product. Many software developers fall into a dangerous trap where they presume that the purchaser will know nearly as much about the product and the environment as they do. Or they assume that all their customers will be as knowledgeable as the leading-edge clients who were involved in the beta tests. A few support phone calls and a few long, frustrating conversations later, the company realizes it's in over its head. So the company starts back-peddling, finding its hands largely tied by a warranty they never understood. These situations are not a legal counsel failure; they're a simple failure to look beyond recouping development costs plus some profit margin.

So what type of support issues do you need to consider? We'll list a few here, but remember that your lower limit on support may be largely predetermined by your competition.

• Is support offered through a toll-free phone number? Or is support only available through the Internet or a bulletin board?
• During what hours will support be available?
• How critical is your product's operation to your customer's business? What kind of response time will you or must you provide?
• How will you deliver corrections to the customer?
• Do you need to have prerequisite service levels readily available to customers to avoid diagnosing known problems again and again?
• How easy is your product to install? Will you offer assistance in installation problems?
• How easy is it to diagnose problems in your software, and specifically, how easy will it be for you to recreate your customer's environment?
• Will security issues preclude your tapping into the customer's computer to perform online system diagnosis?
• How many customers are you expecting? How many support requests will they generate daily? How long will you, on average, spend resolving each one?

Hmmm...maybe there's a reason that there's so much great shareware floating around!

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