[lally] Re: SPLA

  • From: "Benjamin Hanley" <hanleb2@xxxxxxx>
  • To: <lally@xxxxxxxxxxxxx>
  • Date: Wed, 7 Jun 2006 13:15:13 -0400

Hi Kumar

Regarding the assumption of usable life, it's just an idea, but perhaps you
can do some research on existing software products similar to yours and find
out how much time passed between major upgrades.  


Once you have a usable life figure, you might be able to find a ballpark
price by dividing the price of competing products by the usable life figure.
This would help you compare total costs, as Rita suggests.


For example if the usable life is 3 years, and the competitors are charging
$30,000 for a comparable product, you would probably want to price yours at
roughly $10,000 per year.  But of course that depends on how the products
compare, and you may be able to charge more because of the financing
convenience.  Depends on your overall marketing plan.


Good luck





From: lally-bounce@xxxxxxxxxxxxx [mailto:lally-bounce@xxxxxxxxxxxxx] On
Behalf Of Xing Rong
Sent: Wednesday, June 07, 2006 1:03 PM
To: lally@xxxxxxxxxxxxx
Subject: [lally] Re: SPLA


Hi Kumar, 


NPV probably is the first thing we would look at. I believe your company has
a timeframe for the product upgrade.


Following John and Remy's suggestions, I would also remind you of the
break-even analysis which is useful for start-up companies and new projects.


CoreSense uses SaaS (Software as Service) model.  They priced the platform
modules and additional features separately.  Whatever the product life is
conceived by the customers, it is always compelling when they compare the
TCO (total cost of ownership)  with that of their competitors' .  I don't
know your product is packaged or customized.  But the same rule applies to


I'm not a computer savvy.  Just some random thoughts here.









remy <remy@xxxxxxxxxxxxxxxxxxxxxx> wrote:

Hi Kumar,

It would seem that MicroSoft would have this information based on the tons 
of data they collect. T think another way to look at this would be in terms 
of finance. If I purchase a piece of software for $100 today and I am 
expected to upgrade the software for next 5 years at $20 per year, then I 
can determine the PV of the upgrades plus the $100. That would be the total 
PV of that piece of software. if I were going to lease it, I would want to 
make sure that the PV of the lease is equal to the PV of the purchase and 
the upgrades.


>Hi folks,
>Let me welcome you to the group by putting up a question which I have been 
>struggling with for the past few days.
>Many of you in the hi-tech world are probably aware that Microsoft has 
>developed its Services Provider License Agreement (SPLA) to sell software 
>on a pay as you use basis. this allows enterprises or web developers to 
>subscribe for the software on a monthly basis as opposed to paying a huge 
>upfront cost. The financial advantages are obvious to the consumers, they 
>get to pay off the software costs as business operating expense as opposed 
>to capital costs.
>My question is around pricing. Microsoft says their software under SPLA 
>is priced so that customers pay the same amount, over the life of the 
>software,in paying on a monthly basis, as they would have paid 
>upfront. Now, how does Microsoft or any other software developer be able 
>to predict the life of a software when technology is changing so fast?
>Does anyone have any idea what industry standards are? Does anyone have 
>any idea on how software could be priced and packaged differently.
>Any thoughts, insights will be appreciated.
>Kumar Pandey
>Chief Operations Officer
>Flatburger Inc.


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