

Ask HN: How to properly license software? - ericmsimons

Hi HN,
My company was recently approached by another company to license some of the software we have built. The software they want to license is complex and very hard to build. It would take a good hacker at least 9 months of 12 hours days to build it (that's how long it took us).<p>They want license it white label, not sure if they want access to the source code though (I'm opposed to allowing source code access).<p>We're interested in licensing, but we're not sure how much to charge for it. Do we do it on a yearly basis? Do we charge 80K/year (the going rate for an engineer)?<p>What has been your experience with licensing software? If I missed any critical points, let me know and I'll post them.
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Tangaroa
I am not a businessman and have no experience in the area, but a couple of
things come to mind.

The white-label requirement suggests that they want to put their own name on
it which suggests they will become a competitor to your company, or they see a
market for it that your company does not. Perhaps your company should charge
per user and/or per copy shipped in addition to the basic rate.

Charging an annual rate may not work if they use it internally. They could
tell you that they are going with another product and keep using yours without
telling you. You could start with the expectation that they will replace it in
3 or 4 years and make the contract for so many years.

If they want new features or configuration assistance, your company already
has the experts and can bill them heavily for the work. Your company might end
up using them as a continuing source of revenue in this way. They might also
recruit your developers.

The software has different values: what it is worth to produce, what it is
worth to a company to have it, and what that company thinks it is worth. If
they are smart, #3 is close to #2 and that is the number you have to bid
towards. It is worth more to the other company to have working software
immediately than to wait a year developing the software itself. To repeat old
advice, start with a high bid that is more than you expect to get and allow
the other side to negotiate downwards.

You will be expected to supply good documentation and to fix any glaring bugs
in the product, so finishing the sale may incur a $10k-$20k cost.

Whatever you get for it is a revenue that you did not have before. As long as
it does not hurt your business for the other company to have the software,
that should be a good thing.

If this one company wants the software, there might be other companies that
want the software.

Get advice from someone more knowledgeable before following any of mine.

