You may want to start at the first part of this blog series.

Software Pricing makes no sense

Joel Spolsky did a great post about how software product pricing is insane called Camels and Rubber Duckies.  Go ahead and read it.  He will get you to agree with him, and then change the argument so you are left even more confused to product pricing.  It is a great article.

Extracting the Maximum Profit per User

In all business you want to extract the maximum profit per user possible.  If the user was willing to pay $15,000 for your software why did you sell it to him at $199?  Because attempting to get that type of per user maximum profit is really, really hard.  You will end up with an entire office of salesman who only take calls from people about their needs, and then try to get the most out of them.  In today’s age I don’t see how any software company can think that will work for long.  Eventually the pricing will get leaked somewhere, so people have a ballpark number.  Then if they come to you and get something totally different they will be miffed.

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 will end up with a megacorp that should have paid you 10,000 developer licenses only buying that one corporate license.  You just lost a huge amount of money for zero gain.  Give them a deal, but don't give them the farm. 

We have some very, very large companies using VistaDB that only paid us around $5,000.  The costs to support such an organization are far more than what you made.  In a few cases the support was very low, but the company still got away with $150,000 or more in software for that one Corporate license fee.  Bad idea. 

It sounds good and you think you will get more people to step up into that bracket who maybe don’t usually buy at that level.  But it doesn’t work that way at all.  The people who really are in that bracket just end up getting the deal of century on your product.

Charge flat licensing, and corporate buyers should have to ask for a special price (minimum 50 units, or something like that).  Keep the pricing very flat, it makes all users think they are equal and simplifies things tremendously.

Flat Pricing with a twist

One trend I see a lot today with companies like Dev Express and Telerik is a flat all you can eat price that is supposed to be per developer.  But almost every company I talk to that uses their tools tells me they only bought one and all share it.  So those companies must be setting their prices high enough to cover this possibility, and then discounting to companies that really do buy the correct number of licenses.

Basically if your minimum price point is something you can still make a profit at you are in good shape.  It is when you are counting on scale, or making things up in volume you get into trouble.  Make sure your price is something you can actually make a profit on for each and every single customer.

StackOverflow has a site called Stack Exchange where you can host your own site likes theirs branded to be your own.  People freaked when they first saw the pricing.  It was explained as simple as you have to be able to make money on it from day 1, when economies of scale kick in (if they ever do) then you discount the software.  I like that model a lot.  Now I think they are taking on Venture Capital and trying to do some much bigger things.

This is a summary of the email to all VistaDB 4 users.

Hard decisions have to be made

This is a very painful note for me to write. I have poured literally everything I had into VistaDB; time, energy, and money. But there are some realities that I have to face up to. If you cannot charge what it costs you to build something, then you shouldn’t be building it.

Our costs as a business have climbed quite rapidly, but income has gone down. In the past three years the following have happened: Health Insurance for employees is up 500%, corporate taxes are up 22% due to new laws in the US, unemployment insurance is 160% higher now, credit card merchant fees are double; and have much higher rates for international sales, business insurance is now totally out of our reach, server hosting is almost double, the list goes on and on. How much more are we making? Actually, I am making less today than three years ago.

Closing the Company

I cannot afford to work on VistaDB full time anymore, and I am in negotiations with a third party to acquire the product.

The office will be closing August 1, 2010.

Not the product or website yet, but read on for more details.

There are several different scenarios that may play out as a part of this, and I want to try to explain them. I had hoped some of the options listed below would have already completed their cycle by now, but they are taking much longer in negotiations than I originally expected. 

Option – VistaDB Acquired

If this third party acquires VistaDB then anything could happen. They could pull it from the market, and make it an internal tool. They could change the license to be based upon royalties. They could drastically change anything they want, it would be their product. I hope this happens, only because it would mean more resources into the product as a whole.

I am seriously considering an offer from this company to go work for them full time. While I would not be working on VistaDB full time, I may still retain some measure of influence on the product direction as an advisor.  The company seems quite sincere in their offer, but the devil is always in the details.

Option - No One Acquires VistaDB

If I can’t come to terms with anyone, then I may hold on to VistaDB, but it will be relegated to a nights and weekends type of activity. There will be no more full time work on VistaDB from me.  There will be little maintenance on the current product, as I am planning to spend my free time on a more advanced engine. Items that don’t interest me, or are too expensive to support will be dropped like a hot rock (Medium Trust for example). I still have a ton of ideas for the engine, and know I could improve performance probably 10x over what it is today, but not without massive design changes. If this is a hobby / research project then I will make those changes. I will be no longer worried about backward compatibility, or all the crazy upgrade paths.  I actually have a complete engine designed and protyped that is actually faster than SQL CE, but without a way to make money on it there is little point in developing it as a commercial product.

If I hold on to VistaDB, I would try to keep the websites and forums up as long as I can, but the server costs are not cheap. I would probably continue to sell the product, but as a company only type of sale (including source) without official support.  There would of course be community support.

Some business friends suggested I keep the product selling as is, but outsource everything and just let it sell until I recoup my costs. That is not my style. The product is complex, and I seriously doubt anyone could provide support who is not a programmer.

Option – Terminate the Product

This could happen if no one acquires the product, and I accept full time employment somewhere that forbids me from working on things in my free time. Many companies have intellectual property and non compete clauses in employment contracts these days.   This could happen, as I am actively discussing going to work for two large companies within this industry.  Neither would probably take lightly to me continuing research on a product that could eventually compete with something they sell.

Option – Open Source the Product

No, Not really an option at all. Who would work on it? Sure lots of people love to consume open source projects, but very few people contribute to them. And I have put a LOT of money into this product, I am not going to just give it away until I can at least break even. I have to put my kids through college, hopefully reclaim part of the money I have put into the company, etc.  And lets face it donation type projects never, ever make money.  Advertising on the site, etc are all pointless wastes of time.

New User Options

I am going to be changing the SKUs to a source only license in a few days. That will give everyone a chance to buy the 4.1 product and source at a reasonable price. It will ensure you can continue to run the 4.1 product as long you want / need it. No matter what happens to VistaDB.

What about activation and Visual Studio plugins?

I am going to release VistaDB 4.1 without licensing built in. This will allow all source users to continue to install and run in the event that everything is shut down.

It will not be a free upgrade unless you own the source; there will be some fee for it. User who don’t purchase the upgrade will not have access to it.

It will not have everything in the 4.1 I had hoped to release, but because there are breaking interface changes and the license system is different (gone), I have to bump the minor version number.

There will be no Sync Provider, for example. The Sync Provider has had a ton of time poured into it, but it is not production ready (not even close).   There will be no model first in Entity Framework.  Some EF extension methods will not be implemented in the current 4.x product (Skip / Take).

We do have some other new features that did get into 4.1, but that is a different post. There are also some changes in requirements, Data Builder now requires .Net 3.5 SP1 present on the developer machine.

The VistaDB 4.1 runtime is still .Net 2.0 SP1. This will be the last release for the 4.x line in all likelihood.

My recommendation

I seriously recommend that everyone purchase the source. It is a cheap insurance policy against whatever the future may hold. Existing customers will see the source in the Upgrades section of their account.  New users can purchase the 4.1 product with the source and continue using it no matter what happens.

I will probably keep the Infinite Codex site as a personal blog (again if the company I go to will let me).

It has been a fantastic ride, but one with a lot of regrets on my part.  Ah, to look back things always look so clear. 

FAQ

What about CornerstoneDB?  CornerstoneDB.com will continue as a stand alone entity.  Matthew McDonald will take that over and run it as his own.

Yes, I did receive that advice back when I first took over VistaDB.  Many of my business friends told me not to do it, but at my previous company we used the core part of the company name in each of our products.  I always felt that tied them all together, and reinforced that our company was unified around this core. 

This worked great in that case because everything we did was central to a core technology.  All of the product brands were really just special uses of the technology, and we really did want to showcase that central technology to as many people as possible.  The products themselves didn’t matter so much, except to show that the core technology could be applied across a lot of different applications. 

But VistaDB is a product, and a brand, but that is not all we do (or can do).

In some cases the company name is the brand.  Mercedes sells their brand rather than the individual models of cars they make.  Most people don’t pay any attention to the letter/number pair on the car itself, they just know it is a Mercedes.  I think that works in some cases, especially physical goods.  I don’t think it works as well for software.

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