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Lessons for Would-Be Software Vendors

I used Jason Short's experience with VistaDB to discuss the challenges of moving from software developer to software. It seemed reasonable to give Jason the last word with some lessons learned:

#1 – Have a pricing model that will make money on what you sell now, not next year. A small company can't afford a subscription model (only five percent of VistaDB users renewed their subscription, for instance). And, by the way, there are no economies of scale. Charge higher and get fewer customers that you can afford to support better.

#2 – Don't include support. You can't afford it. On average, I spent almost $1,000 per user in tech support during year two. Free tech support is an open invitation to get a call for every compiler error message. No amount of documentation will prevent this. People who are solo coders want someone else to bounce ideas off, play out designs, etc. They end up hitting whatever vendors they can get free support from in order to have that sounding board. That's consulting, not tech support.

#3 - No free updates. You have to get a constant revenue stream and upgrades are one part of that. Naming matters, here: Version 4.0 was my first major upgrade and its name scared buyers off. If I had called it version 3.6, my base would have moved to it without a second thought.

#4 - Big companies should pay big prices. I have to agree with Joel Spolsky that having a corporate edition at any price is a bad idea. You'll end up with a megacorp that should have paid you 10,000 developer licenses only buying one corporate license. Give corporate buyers a deal, but don't give them the farm.

#5 - Pick a tight niche. If we had an ASP.NET-specific database engine that only worked in that environment and handled caching, replication, etc., we could have charged a lot more for it and specialized the code, as well. Pick the tightest niche you can and stick to it: You can charge more money.

#6 - Free trumps everything for most companies. SQL CE is not perfect, but it is free and it's flattening the database market. It's hard to compete against free.

Posted by Peter Vogel on 08/13/2010

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