Subj : Re: How much should I charge for fixed-price software contract? To : comp.programming,comp.lang.java.programmer,comp.lang.lisp From : michael Date : Mon Jul 11 2005 05:16 pm jonathon wrote: > Pascal Bourguignon wrote: > > For example, if their business practice on investing is to expect a > > TTROI of 0.25 year, and your software will allow them to earn 1 more > > dollar/year/customer and they have 100,000 customers, that is, your > > software will earn them 100,000 more dollar/year, then you can quote > > it for P = 0.25*100,000 = $25,000. > > So what would be the rationale for charging double for the same product > simply because they are willing to wait six months rather than three > for ROI? That they will pay for it. You don't need to have a rationale -- you figure out what term ROI they will accept and then price your product accordingly. If other people are out there who can and will do the same job for a lot less, then you can't use that idea. But if you are the only one who is calling on them (or whom they know) who can implement the idea in question, then you should be able to get whatever the cost savings merit from an investment standpoint. There's a problem with Pascal's analysis though -- it doesn't allow for uncertainty, and uncertainty is a very hard sell. You can do the math to allow for it, but if the person you are talking to doesn't understand things like Expected value, utility of money and other speculation (or gambling) principles, they are going to tend to be much more risk averse than they "should" be depending on the decision maker's personality. Michael .