Selling Software - Support Model / Costs

randomshenans · 6 Jul 2016 at 13:46

Right, so we're new and building and just finding our feet when it comes to sales, so learning as we go.

Our current model is simple; it's an annual license charged yearly, at $1 per student you have (charged to the university/ college etc.).
So, you have 10,000 students, it's a $10,000 license fee.

Yet, one thing I hadn't properly really factored in was support model and costs. As such, I'm currently writing up a proposal for a potential customer, which is only 1500 students, so would be $1500 license, but with support I was thinking $2000, so 1/3 license cost as a charge per year.

I've done some looking online about calculations of doing this and this seems reasonable from what I can see.

Does anyone have any experience in this and care to share/ comment?

Ev0 · 6 Jul 2016 at 13:57

Working for a vendor our support is something like 20% of initial purchase cost with uplifts of about 5% each year. First years support included in purchase price so support charges start from year 2 onwards.Something like that anyway!

However our deal sizes are probably a fair bit larger than that so maybe 30% on lower value deals isn't too bad a way to go.

dowie · 6 Jul 2016 at 14:17

Yeah - going forwards you might want to price your support based on how often the clients use it rather than how many users they have. I'd also look at some minimum price for the licence too.

So you keep track of both the number of tickets raised by each client and the time taken to deal with each ticket(as in hours logged by the support person not hours/days until the ticket is closed), review it annually and increase the cost of support for those clients who use it disproportionately more. You'll probably also want to clearly define what is covered under the maintenance agreement and have the ability to bill them for consultation etc.. if they become particularly demanding with regards to things that don't fall under maintenance.

randomshenans · 6 Jul 2016 at 14:40

Interesting you lump it in for the first year, that's a nice touch, though. Not sure I want to be as generous at this point haha

randomshenans · 6 Jul 2016 at 14:42

dowie said:
Yeah - going forwards you might want to price your support based on how often the clients use it rather than how many users they have. I'd also look at some minimum price for the licence too.

So you keep track of both the number of tickets raised by each client and the time taken to deal with each ticket(as in hours logged by the support person not hours/days until the ticket is closed), review it annually and increase the cost of support for those clients who use it disproportionately more. You'll probably also want to clearly define what is covered under the maintenance agreement and have the ability to bill them for consultation etc.. if they become particularly demanding with regards to things that don't fall under maintenance.

Yea, very good points. I'll make sure we log all this in tickets and have the papers drawn up to define the support model and any out of this scope is charged at a consulting rate of x per hour etc. Good points. I'll get on this one.

I've been looking at a sliding scale; so anything under 10,000 students is 30%, 10-20,000 is 20% and over 20,000 is 10% of license fee.

That would be a good place to start, then as you say, redistribute that based on hours/ tickets/ support level of the client

Ev0 · 6 Jul 2016 at 17:44

randomshenans said:
Interesting you lump it in for the first year, that's a nice touch, though. Not sure I want to be as generous at this point haha

Well it's a rather large company (I just work there)

Just though might give you an idea though, Dowie's suggestions are good.

Kuros · 7 Jul 2016 at 14:06

Honestly, depending on what the software is, I don't like and wouldn't go with a product that has sliding support costs.. it's easier for everyone involved if it's a flat fee.