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This is an interesting concept, but I'm not sure I would use software like this in my small business unless the software owner made some sort of price commitmen

This is an interesting concept, but I'm not sure I would use software like this in my small business unless the software owner made some sort of price commitment up front. Otherwise, several years down the road, I'm hit with the bill - and the owner could charge me anything they want. I'm already dependent on the software.

kemitchell 5y ago
Have a look at the "Big Business" section: > You may use the software for the benefit of your [big] company: > 1. for 128 days after your company stops qualifying under Small Business This functions as a grace period, both for realizing that you've grown out of the "Small Business" category and to reach out and do a deal. > 2. indefinitely, if the licensor or their legal successor does not offer a fair commercial license for the software within 32 days of written request The definitions of "fair commercial license" and "fair price" add accountability from there. In particular, "fair price" is defined so if the vendor advertises a rack rate, and customers have actually paid it in the past year, a "fair price" means rack rate. All of this is meant to allay the fear you mentioned: I'm small now, but if I get big, they'll gouge me. The license commits the vendor to deal fairly when that time comes.
- onphonenow 5y ago
  We see this type of deal in real estate financing. These terms often drive the "rack rate" way up even if that is a net negative for licensor. They just need a few suckers to pay that rack rate, and that locks in something very high. Commonly the trick is to do something like $200/month per employee. For a small business they'll pay it, they have 2 employees who use the software a ton. For the 2,000 employee business that makes no sense, because only 5 folks use it, but licensing is based on total employees (all you can eat model). That turns it into a $40M licensing deal. Can't there just be an upper bound that any reasonable supporting software can't exceed? Ie, can never be licensed for more than $500K per year or whatever?
  - kemitchell 5y ago
    Thanks so much for this comment. You've got me thinking. My mind certainly hadn't gone to real estate on this. The hard part here is always leaving enough flexibility to serve a lot of potential products and business plays. When the software is mass market, bound to do a lot of self-serve online sales, that's going to overwhelm any benefit from "gaming" rack rate. I'm not concerned. The prickly case is relatively niche products licensed for big dollars to relatively few customers. If your market is six big firms, so your upper bound is six total deals, you're not losing much by gaming your published figure. With six you probably don't advertise a figure, since you can tell your whole market with six sales e-mails. There might be an unhappy medium between that tiny addressable market and a mass market where both advertising pricing and gaming advertised pricing makes sense. A lot of software shops do state a fixed per-seat, per-code, or other incremental rates. Perhaps with volume discounts. I don't think that actually hurts the license, since that tends to bound negotiations, based on publicly available evidence. But it's just as common for those pricing pages to have, say, a one-user price, a ten-user price, a fifty-user price, and "call us" for anything above that, which might still be priced by user, but might be all-you-can-eat for a flat fee. There's market segmentation, and it may not be immediately obvious which segment corresponds to the company requesting an offer. If it falls in the "call us" segment, there won't be an advertised price, so the definition of "fair price" in the terms falls back to just "a fair market price for a fair commercial license". I follow the logic of a stated upper bound. But I'd have no idea how to set one dollar figure for every project that might use the Big Time License to reach small businesses. The temptation would be to give a lot of headroom, which could make customers nervous. Why am I looking for comfort from a $500k/year figure for this library with competitors selling $3k perpetual licenses? And from the business side, I'd never tell a software company, especially one focused on a single product, to publicly cap how big its sales can be. That could be the effect, since a big company could ask for an offer under the license, receive one, point to the definitions of "fair", and cry foul. Big hassle.
    - stickfigure 5y ago
      I'm just saying that as a consumer of software, I am wary of subjective terms like "fair" that I can't afford to litigate. Yeah, pricing software is hard and of course the seller wants to tailor each deal to the customer... but if the customer is already dependent on the software, the power relationship is lopsided. As a customer, if your software is something that I can fairly easily replace, then sure this license is not scary. If it's critical to my business, this license is the same as a "trial period" and I need to have some idea what happens at the end of the trial period so I can compare it against the alternatives (competitors, build in-house, etc). Examples: Some random image processing library - sure, I can probably find or make alternatives. Some exotic database - probably not, too much lock-in.

kemitchell 5y ago

Have a look at the "Big Business" section: > You may use the software for the benefit of your [big] company: > 1. for 128 days after your company stops qualifying under Small Business This functions as a grace period, both for realizing that you've grown out of the "Small Business" category and to reach out and do a deal. > 2. indefinitely, if the licensor or their legal successor does not offer a fair commercial license for the software within 32 days of written request The definitions of "fair commercial license" and "fair price" add accountability from there. In particular, "fair price" is defined so if the vendor advertises a rack rate, and customers have actually paid it in the past year, a "fair price" means rack rate. All of this is meant to allay the fear you mentioned: I'm small now, but if I get big, they'll gouge me. The license commits the vendor to deal fairly when that time comes.

onphonenow 5y ago
We see this type of deal in real estate financing. These terms often drive the "rack rate" way up even if that is a net negative for licensor. They just need a few suckers to pay that rack rate, and that locks in something very high. Commonly the trick is to do something like $200/month per employee. For a small business they'll pay it, they have 2 employees who use the software a ton. For the 2,000 employee business that makes no sense, because only 5 folks use it, but licensing is based on total employees (all you can eat model). That turns it into a $40M licensing deal. Can't there just be an upper bound that any reasonable supporting software can't exceed? Ie, can never be licensed for more than $500K per year or whatever?
- kemitchell 5y ago
  Thanks so much for this comment. You've got me thinking. My mind certainly hadn't gone to real estate on this. The hard part here is always leaving enough flexibility to serve a lot of potential products and business plays. When the software is mass market, bound to do a lot of self-serve online sales, that's going to overwhelm any benefit from "gaming" rack rate. I'm not concerned. The prickly case is relatively niche products licensed for big dollars to relatively few customers. If your market is six big firms, so your upper bound is six total deals, you're not losing much by gaming your published figure. With six you probably don't advertise a figure, since you can tell your whole market with six sales e-mails. There might be an unhappy medium between that tiny addressable market and a mass market where both advertising pricing and gaming advertised pricing makes sense. A lot of software shops do state a fixed per-seat, per-code, or other incremental rates. Perhaps with volume discounts. I don't think that actually hurts the license, since that tends to bound negotiations, based on publicly available evidence. But it's just as common for those pricing pages to have, say, a one-user price, a ten-user price, a fifty-user price, and "call us" for anything above that, which might still be priced by user, but might be all-you-can-eat for a flat fee. There's market segmentation, and it may not be immediately obvious which segment corresponds to the company requesting an offer. If it falls in the "call us" segment, there won't be an advertised price, so the definition of "fair price" in the terms falls back to just "a fair market price for a fair commercial license". I follow the logic of a stated upper bound. But I'd have no idea how to set one dollar figure for every project that might use the Big Time License to reach small businesses. The temptation would be to give a lot of headroom, which could make customers nervous. Why am I looking for comfort from a $500k/year figure for this library with competitors selling $3k perpetual licenses? And from the business side, I'd never tell a software company, especially one focused on a single product, to publicly cap how big its sales can be. That could be the effect, since a big company could ask for an offer under the license, receive one, point to the definitions of "fair", and cry foul. Big hassle.
  - stickfigure 5y ago
    I'm just saying that as a consumer of software, I am wary of subjective terms like "fair" that I can't afford to litigate. Yeah, pricing software is hard and of course the seller wants to tailor each deal to the customer... but if the customer is already dependent on the software, the power relationship is lopsided. As a customer, if your software is something that I can fairly easily replace, then sure this license is not scary. If it's critical to my business, this license is the same as a "trial period" and I need to have some idea what happens at the end of the trial period so I can compare it against the alternatives (competitors, build in-house, etc). Examples: Some random image processing library - sure, I can probably find or make alternatives. Some exotic database - probably not, too much lock-in.