The dirty little secret of software pricing

Your systems. Working as one.Your systems. Working as one.

The Dirty Little Secret of Software Pricing

Stan Schneider, CEO

Quotation: John Q. Customer

• Dev seat: $5,339• Floating dev seat: $7,849• Support & maint 20% per seat• Runtimes (per core)

1-100 $559100-1000 $3251000-10000 $22410000+ $145

Fair Questions!

• How much does software cost?• How much is software worth? • Who should pay for it? • What’s fair? • Should vendors charge per floating license?

Per user? For support only? Runtime royalties?

• Where did that price come from, anyway???

Business Model Requirement

The Dirty Little Secret

Software pricing makes no sense. Vendors make it all up. The real goal is to charge in proportion

to how much money you have. Period.

VendorRealCost

CustomerIncrementalExpectations

A Fundamental Conflict

Slippery Slope of

Justification

The gap between the vendor’s real software cost and the customer’s incremental desires cannot be bridged. Justification attempts fail.

How to Justify the Gap?

• Cost to the vendor• Value to you

Vendor-Cost Justifications

Real Cost Analysis

• Valid Costs– Figure out what to build– Develop & maintain code– Match applications to usage– Build awareness– Help users– Operate an organization

• No/Little Cost– Production– Shipping– Restricting your use

Can’t Charge for Real Costs!

Support Cost

Incremental Justification: Everyone must pay for support, because large teams generate more

support load

Reality: Large teams with local experts lower support costs

License Cost

Incremental Justification: Providing you with a licenses costs money

Reality: That piece of paper is just something to count

Usage Cost

Incremental Justification: We charge you for what you use

Reality: It doesn’t cost anything to ship you everything

T&M Cost

Incremental Justification: We charge only support and services hours

Reality: Hours don’t reward excellence or prevent suprises

Sidebar: Controlling Costs

The sole imperative to control software cost is to establish a stable team working on a single code base

User-Value Justifications

Software Delivers Real Value!

Connext Tools

RTI Connext™: Edge to Enterprise

RTI DataBus™

ConnextMicro

Pub/Sub API(DDS subset)

Small Device Apps

ConnextDDS

Pub/Sub API(Full DDS)

DDS Apps

ConnextMessaging

Messaging API(DDS++ & JMS)

General-Purpose Real-Time Apps

ConnextIntegrator

Adapters

DiverseApps/Systems

Administration

Monitoring

Recording

Replay

Persistence

Logging

Visualization

API Usage Value

Incremental Justification: We charge per developer using our API, because the software

brings value to that developer’s code

Reality: The value is really to the project

Runtime Value

Incremental Justification: We charge per CPU, because that shares the risk

Reality: The bigger risk is estimating shipments

Support Value

Incremental Justification: You only pay if you get value from support

Reality: Support is a small part of the value received

Bundle Value

Incremental Justification: We charge per “product”, because you get more value with

more product

Reality: You need what you need

So…What Makes Sense?

The Secret (Almost) Makes Sense!

• Values are better metrics than costs• The real value is reducing risk

– Bigger investment => more risk– More risk => more real value

Vendors should charge in proportion to how much you are investing in your project

The Real Key: Simple, Open & Fair

• Pricing should be Simple– Base pricing on a single project metric

• Pricing should be Open– So you know what you may pay

• Pricing should be Fair– Map charges to your investment– Charge support only to those using it

Why Do Vendors Justify?

RTI Pricing: Simple, Open, & Fair

• Charge only for developers• Support: $4k/name• Open Community Source Connext DDS: Free

– Windows, Linux, Full source– Latest version– Support: $160/hr

Connext DDSConnext Tools

Connext MessagingConnext Tools

Connext Professional

Connext MessagingConnext Integrator

Connext Tools

$1,995/yr $2,595/yr $2,995/yr@mid volume

RTI Model Summary

• Free, full source & binary DDS for community– No cost, no hassle, no strings– Latest version– Share source & binaries– Professional T&M support

• Low-cost commercial product for projects– Tools, advanced functionality, warranty, platforms– Simple, open, per-developer pricing– No royalties or deployment fees

No Bull

About RTI

• Market Leader– Over 70% DDS mw market share1

– Largest embedded middleware vendor2

• Standards Leader– Active in 15 standards efforts– OMG Board of Directors– DDS authors

• Real-Time Pedigree– Founded by Stanford researchers– High-performance control, tools history

• Maturity Leader– 600+ designs– 400,000+ licensed copies– TRL 9 1Embedded Market Forecasters

2VDC Analyst Report

2008

Global Support and Distribution