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Ask Joel Spolsky: Pricing – what changed?
67 points by sorenbs on Apr 13, 2013 | hide | past | favorite | 23 comments
In 2004 you stated "I have certain competitors that [...] charge small customers per-user but then there's a "unlimited" license at a fixed price. This is nutty, because you're giving the biggest price break precisely to the largest customers, the ones who would be willing to pay you the most money."[1]

Today fogbugz has a "unlimited" license as well as substantially lower per user pricing if buying 150+ licenses.[2]

What changed?

[1] http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html [2] https://shop.fogcreek.com/FogBugz/default.asp?sCategory=HOSTEDFB&sStep=stepEnterEmailAddress&fccmp=_buyfb (click the prepay radio button)

It's always felt to me that 'unlimited' over a certain amount makes it easier for large companies to purchase/subscribe because it means they don't have the overhead of tracking usage.

"Whoops, we're only licensed for 172 users, but we just hired Bob and we now need to get a new license key for him!" causing hours or days of delays just isn't appealing. Saying "unlimited" to the companies that have hundreds of users might be leaving some money on the table, but also might be netting some extra sales you might have otherwise lost due to fear of complex licensing.

If it is installed software, you also have to do license audits, which usually require going on-site. Much easier just to slap an unlimited license on a product.

It could also be the lessening influence of Microsoft on the software industry. A decade ago, big companies were used to paying per seat because the bedrock apps like Word and Visual Studio were always licensed per seat or per server. With the rise of smaller competitors offering online tools and software either for free or with site-wide licenses, big businesses might try to avoid the hassle of tracking every user added and subtracted.

(It's also possible that Microsoft's pricing model has less influence on Joel since he's been away from the company for a long time, but that's just speculation.)

Now that's why I come to HN - simple, straightforward insight that looks obvious but everyone missed it.

Thank you. I will now quote you as if I had though of it myself in future conversations.

I will now quote you as if I had though of it myself in future conversations.

..and that is why I come to HN.

He was wrong; Atlassian's pricing cut the floor out from the market, so Fog Creek changed our pricing to stay competitive. I've watched some SCMs change their pricing in response to Kiln's downward force, too, and I expect that Trello's competitors are doing the same. Welcome to responsive pricing.

It's complicated, but the sentiment that charging your most price insensitive people a fixed price is nutty is still true - I don't think that's wrong. Although Jira has a fixed price ceiling, Confluence is not priced that way: http://www.atlassian.com/software/confluence/pricing/?tab=do...

As for FogBugz, as another poster wrote "if your competitor is an order of magnitude cheaper, and not significantly worse" you have to respond to that (even if you think they are nutty, and a bit more than significantly worse).

Sorry; the "he was wrong" applied purely to FogBugz' situation due to the Jira price cap, which is really not clear in my comment. That'll teach me to bang out a response on my iPhone in answer to a tweet when I ought to be reading a book.

I think it's most likely that large institutions (who are most able to pay) are willing to pay a premium to avoid the hassle of adding and removing seats from their license with every change in staff.

It was probably also starting to be incur noticeable administrative overhead for fog creek

Joel has no obligation to be consistent over 9 years or to keep to the same pricing philosophy as his company has grown and evolved significantly.

Bear in mind that "Unlimited" usually is not so. Even if his customer has 100k employees, the likelihood is that only a few thousand at most will use it. Why nickel-and-dime them - make the sales process as simple as possible and make everyone happier.

I don't think the OP is demanding consistency, merely asking what changed his opinion.

(it might indeed be the realization that there aren't companies with Unlimited employees, but maybe it's some other interesting reason)

I am sure Joel and the Fog Creek team has discovered that having an unlimited license for large customers work best for them. I mean, that's why they are doing it. I would be interested in knowing the thoughts around this, whether this is a general rule for software companies or something specific to their current position in the market. We can guess and reason all we want, but Fog Creek is a big player with a long history. I think there might be something to learn.

I don't understand the quote. Economies of scale always give price breaks to the big buyers. I don't understand why that's nutty?

I think what the OP is trying to say with the quote with traditional volume discounts, you're always getting some additional money per additional unit. With an "unlimited" license, you don't add any additional revenue while the customer adds people. After a certain point with a site license, everything is "free" and that could be bad for the person selling (no additional revenue, increased support costs, etc)

Unlimited pricing is about fairness. You can't charge a small team the same as you would a gargantuan organization. They don't want to count their users and the supplier can't. The real dividing factor however is the fact that large organizations want different levels of service and different software (Active Directory integration etc).

jira does site licenses?

I think this is probably a large reason. If your competitor is an order of magnitude cheaper, and not significantly worse, then it gets very hard to compete.

Larger companies tend to be in a position to 'roll-their-own' so you sometimes have to discount.

They may not be able to execute their plans well, but it gives them negotiation power.

Once you get to a certain size, you hire people specifically to cut costs.

Site licenses are in recognition of those people IMO.

It might just be easier to have that option than to negotiate individually with each large company.

It's not the first time he's inconsistent.

One of his recent articles: http://www.joelonsoftware.com/items/2012/07/09.html also reads a little bit like bashing his own product FogBugz and advocating that it's a bit useless:

"Do not allow more than two weeks (in fix time) of bugs to get into the bug database." "Then close as “won’t fix” everything left in the bug database. Don’t worry, the severe bugs will come back."

Maybe they discontinue FogBugz soon and only concentrate on the more hip Trello?

Am I not the only FogBugz user who read his old articels advocating the use of bug trackers, and then read this recent piece which advertises Trello and thinks that he kind of sees or advertises Trello as an alternative to FogBugz? And that the snarky comments against full bug databases are a bit inconsistent?

Also, I'm still disappointed that they discontinued Kiln for self hosted servers. They did that silently.

Trello is not and will never be designed for software developers. Can software developers use it? Sure. You could track your bugs in Excel if you wanted to. That's not Trello's audience.

Regarding Kiln for self hosted: At Fog Creek, we've always said we don't want your money if you're not amazingly happy. We're not taking your money right now because we're not certain we can make you amazingly happy... yet.

We found that the installed Kiln customer experience was not up to our standards as a company, so we've deferred taking on new installed customers until we're satisfied that they'll be amazingly happy with our product.

We prioritized on our On Demand environment because that's where the bulk of our customers and revenue are. We still want to find a solution for our self hosted customers as well, but it wasn't our immediate priority and we weren't going to hold up shipping Kiln Harmony until we figured out what we were doing with self hosted installs.

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