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Pricing a document management system
Since Joel would not answer to my question in "Ask Joel"(I don't see why - I see that all others questions have at least one answer from Joel), I'll make my question public. If you can give a hint about this problem, please feel free to do so.
Here's my story:
"We are small east-european firm (2 guys). Our just finished product is a three-tier DMS. The client and middle tier is Win32 exes(the middle is a NT Service) and the db is SQL 2000. The product is able to store in db documents, control them(check-in, check-out, user&group based security(optionally integrated with an NT domain), route them(to approvers, serial or parallel), log them, notify users + versions of docs, audit, etc). The product can also scan&view&edit&annotate documents. The docs are full text searched against SQL 2000 FTS.(Office docs, pdfs, scanned tiffs, xml, rtf + installable iFilters). We can also store additional metadata&properties for every document. The client exe is light and autoupdatable.
We have integrated the DMS with Word, Excel, PowerPoint, Autocad(to save/load directly from them), and with Outlook(to save automatically messages based on some rules).
The interface is VERY easy to use(like Windows Explorer) and we have implemented the Office 11 theme.
In the version 2 we want to enhance it with PDF Capture, Scan to PDF, ....& many more function related to PDF.
For the version 3 we like to add a web interface made in .NET framework. This web interface will anonymously/secure publish documents for customers/partners/vendors/...
The system can be used very well by big names but we think is best suited for small/medium entreprises.
What we like to know is how to price this system since we are located in east Europe & our firm is very small. I've seen systems which cost 150$/named user, others 1250$/named user, others 4750$/server + 150$/named user, ...
Since we are talking here about thousands of $ we think we need a salesperson, but since we are not located in the US we think we need resellers. We can pay to resellers more than 50% since our product costs are relatively small compared to Western firms.
Is a good approach to make a cheaper version for SBS?
Another point is how to charge clients? thru ShareIt or similar since we are located in east Europe."
Emil
Wednesday, February 25, 2004
Isn't that rather similar to what you can do with SharePoint and/or Exchange ?
It's hard to see what your USP is, unless its low price, but that won't really help in the Enterprise space.
Steve Jones (UK)
Wednesday, February 25, 2004
"I see that all others questions have at least one answer from Joel"
Only the ones that do get an aswer become public. For all we know there might be 100 a day that go unanswered.
Just me (Sir to you)
Wednesday, February 25, 2004
It's public from the first minute I post it.
Emil
Wednesday, February 25, 2004
It looks public to you, but it really isn't. Only the poster can see it until Joel answers it.
Phillip J. Eby
Wednesday, February 25, 2004
Yes it's similar with SharePoint document management features, but SharePoint it's a portal, it has basic document management capabilities(doesn't have audit log, scan&annotate documents, etc). SharePoint it's a big web collaborative enviroment. Our DMS is a simple but powerfull desktop application specialised in document archival and retrival and of course it has collaborative functions too(document approvals, routing).
I've seen DMS which costs 1250$/user. They will not sale anymore because MS launched Sharepoint?
Sharepoint is best suited in large entreprises where no deployment is a plus, our DMS is best suited in small/medium firms and for departamental use where is a lot of paper and you need to scan&archive.
With our DMS for ex. you can scan all your bills, annotate them, put some custom information about every of them (billing date, amount, ..) and then when you need to find a bill you can easily perform a full text search or perform a search based on custom properties: "All bills dated between xDate and yDate"
I agree that partially we compete with SharePoint but we address different needs and different clients types.
Emil
Wednesday, February 25, 2004
What you really need is an American company to act as your marketing agent.
There are entire companies that just take technologies from small international firms and market them in the United States. I doubt that you'd have much success in the US if you didn't try to hide the fact that you're an Eastern European company. People will ask themselves "How will we get tech support from Romania?"
Benji Smith
Wednesday, February 25, 2004
Benji, this is my point too.
What I have to find out is how much to charge for the system to get attention from resellers/agents? and
How do I find this agents/resellers?
Emil
Wednesday, February 25, 2004
Like you sell anything, you get it in front of them.
CeBit would have been the first opportunity but that finished yesterday. http://www.cebit.de/homepage_e?x=1
Even if you don't exhibit at shows you can meet others and work the show from the aisle.
You can start by searching for US dealers in your market sector, decide on the kind of size of dealer you want (US distribution is either national or very very local). Once you have that list (and you've done the credit checks), talk to them personally by phone and when you have a sufficient number go visit them personally.
Most of them will expect help with marketing your product to being with, by which I mean you either give them hard cash or product for it. Don't expect any return on sales in the first year, then if you get any you'll have a pleasant surprise.
Simon Lucy
Wednesday, February 25, 2004
I too asked a pricing question of Joel which never made it. I thought it was revenge for asking another question he didn't like but perhaps he's just not very good in this area.
gwyn
Wednesday, February 25, 2004
Ok, let's test some numbers:
How do you feel if I charge you 5 user Starter Pack = 299$, and any additional user 199$? with discounts for higher numbers.
I think that charging 299$/5user sounds appealing for small firms(if you have SBS or MSDE it's very good deal).
They got used with it and when they grow up they'll buy more user licenses which are more expensive: 199$/user.
Emil
Wednesday, February 25, 2004
Now I have no experience in this area (I'd like some!) but from a gut feel?
1. Too cheap. Sure make it cheap in volume but the unit price is too cheap. Looks like a lot of functionality for the money compared to other things in the market. Who do you see as real competitors? MS never seem to produce proper solutions to these things so you're probably way ahead of them. Is project a decent project management tool? Nope. Is SourceSafe a decent CM tool? Nope.
2. I don't like the idea that is costs you less for the starter pack. Anyway, surely they'd just keep buying starter packs instead of individual licences!
3. What are you going to do about maintenance? Charge them an annual 15% charge for new releases/support or to upgrade they have to rebuy (at a reduced price)??
Got a version I can have a look at? I'm in a similar, slightly overlapping in market but not competing, position. I'm not going to be GA with my product until June. Doing a pitch to a large early adopter/reference site next week (but only for 10 users + setup + bespoke integration). Aspects of consulting-ware as it's been called. I've currently no idea how to pitch the product pricewise. There is no real wisdom on this... it all seems to come back to "as much as you can". Whether any price makes your business sustainable or not on a long term will depend, I guess, so much on how many units you can shift.
Are you planning on selling in the UK through a reseller? Does the product require setup/consultation?
Please keep posting. Or email me off-list.
gwyn
Wednesday, February 25, 2004
1. I know that you'll say that is to cheap, but I'm just testing. Why did I choose a starter pack = 299$/5 users:
- an employee/manager which wants to purchase software, for 300$ don't need much approvals and then are more chances to buy more licenses once they get acustomed/liked features;
- since MS charge 599$/SBS I want to follow this wave: for a company who purchased for a low price SBS, I think that buying a DMS for a low price will complete the process;
2. Starter pack = the first 5 users;
3. I think both: optionally charge them an annual 18-19% for maintenance/support/new versions or if they don't have an annual contract charge them 30-50% depends on version; but I'll strongly encourage them to purchase a support contract. A-pro-pos another question: if I sell thru a reseller and the client choose a support contract how much from 18-19% to take for me? a reseller will be happy to respond to support questions/maintenance for to say 10%?
4. I think that I'll grow my prices, I'll be able to sell only thru resellers, if I keep them low I'm increasing my chances to sell directly thru web site. There will be always people who want cheaper products; they don't want to pay for the salesperson, they want to study options.
The only problem for us is support: we can't make telephone support because of differences in time between East Europe and US/Canada/Australia/UK/...(if we grow we'll be able to hire employees to respond at phone in the night)
We can be very prompt on email support and we'll make the website very informative&descriptive about every step.
For us, I think that (higher prices thru reseller - comission) = (lower prices directly thru website); and if we'll sell thru reseller they'll attack big firms to justify their costs and there is a MS SharePoint segment(not necessary by functionality) - and big firms always will buy from MS agains noname romanian brand(even if the approach is better)Maybe I'm wrong with this thoughts.
We are very small and we want to attack to problem vertically - document archival& retrival for small/medium firms or departamental use.
I think the solution is both channels: directly thru website at a low price and if I get attention from resellers, they'll be able to charge more than it's listed on our website(if they want).
We also have another product, a DMS for a single user, it's not client-server: you can: put in a db/file documents(Word, Excel,tiff, pdf, ..); scan&annotate&view paper; have different versions of the same doc, custom properties, conduct a full text search, publish a read-only db on a cd(with bundled with the viewer of the db - the same exe but the write capabilities are off, and it's free for easy distribution). The price for this is 99$/user; I think this price is right, but you can comment this.
What we want to achieve is to create a painless process from one user (single user DMS), to 2-5 users/group(Starter pack) to larger firms (additional licenses).
5. We'll not make public any copy until July/August.
6. Yes, we are planning to make resellers around the globe, but especially in countries where the language is English. Later, if all is ok, will plan a spanish/frech version.
We plan to make, as much as we can, marketing materials, help, tutorials, flash& videos for resellers.
To install the product is a very easy server setup program(for middle tier) which ask's you: where to install, the SQL Server account&server, and optionally a SMTP server for mail notifications. The client setup ask's you where to install and the name/ip of the middle tier server. That's all.
Optionally(you need to download separately from our site) you can install a ISAPI dll under a web server to make a HTTP tunnel: if you are on a beach in Hawaii with the laptop in your hands and you have installed/downloaded the client you can access your firm documents db just suppling the place where ISAPI dll is installed(How it works? simply, the client connects at ISAPI dll thru port 80(can cross the firm firewall), then the ISAPI dll conects to middle tier(which takes dates/documents from SQL Server), and sends back the response - and I assure you it's more quicker similar web app - it has rich interface, maintan state and compresses the trafic between tiers + you can have download/upload progress bar, resume capabilities,...)
Emil
Wednesday, February 25, 2004
+
6. We are planning to pay to resellers intially 50%. If they sell more than 50.000$ in year we'll pay them 60% and if they sell more than 100.000/year, we'll pay 70%.
What do you think about this numbers?
Emil
Wednesday, February 25, 2004
Let's test again accordingly with I've said:
- 299 or 499$/Starter pack(5 users) - only for Small Business Sever; (I think mostly saled thru website)
- 2990$/Starter pack (5 users) - where is not an SBS installed; (I think mostly saled thru resellers)
- 199$/user for additional users, with discounts for higher numbers.
What do you think?
Emil
Wednesday, February 25, 2004
Phew! That was a lot to read.
You're right about the resellers. It's the only way to go for you. I have no idea about these guys operate; margins, exclusivity etc.
I agree with your philosophy with using rich win forms clients rather then web front end. And in the main I'm doing the same. Browser capable applications are highly overrated and usually bloody awful to use, even for the simplest of applications.
In terms of your $99 package for a single user system. Who are you going to sell this to?
* Individuals within an organisation I would guess. Hopfully these people would become ambassadors for your product and persuade others in the organisation to buy it.
* Individual consumers? Maybe but this isn't the market you want to be in is it?
* Consultants. Again these people would become ambassadors for your product and you may get leads through their recommendation to clients.
You've got to sell a lot at $99 to make a million! As you're actually trying to target enterprises why not treat it as a sales mechanism and make single versions free but minimize the cost to yourself and give a lower level of support (fixed according to your priorities, not theirs).
I don't understand the relevance of SBS in your pricing (sorry, I might be missing something) ?????
I think I would follow other conventional advice and:
* don't set your prices too low. Allegedly the most common mistake. You can always drop them later
* instead of simply $299 for 5 user starter pack, advertise the price as $199 each (or whatever) but then make a big deal about a special offer of the first 5 licences for $299.
Have you looked at Documentum?? This is a heavyweight documentation management system. I think it's bastard expensive ($?,000). When you go to their website (www.documentum.com) you can see no prices which normally means you'll be paying as much as you can afford! How does it's features compare with yours? It's definite consulting-ware
Have you got anything you can send me off-list? screenshots? user guide? just so I can get a feel of what it does. As I said, it's relevant to the area I currently consult in so I would like to see what's available as I could be one of those ambassadors! I can't really think of the price any better than you can but having some more feel for what it actually does and how would give me more of a gut feel. You say it does x,y and z. But how well it does x,y and z will have some bearing on its value.
Also as far as I see it, beause of the possible uses for your product,you're not entering a vertical market but actually a horizontal market. There is no particular industry sector it appeals to.
We're told this isn't a good thing. ISV's should go vertical. I'm in the same situation though. When something's THAT good you can't just limit it to one sector!
gwyn
Wednesday, February 25, 2004
I know that ISV should go vertical, but document management has so large applicativity that it's impossible that all clients are buying SharePoint or Documentum or "name it" big DMS. It's true that if you are fishing single in a lake, you can make more than fishing togheter in a big ocean. I'm not trying to fish more and I'm not trying to make a million like you said, I'm trying to make a living.
Of course I'll market Starter Pack as "special offer", that was in my mind.
The relevance of SBS is: to use our DMS you need to have SQL Server. SBS integrates SQL at a very low price. Who has SBS is small organization or it has limited funds, don't you agree?(Maybe I'm wrong here)
I want to sell the single user edition to inviduals with an organization, consultants and users who have a mess on their desktop :). Home users will not buy at 99$(most of them), they consider is too expensive and anyway they don't have a lot of paper/documents to organize/search.
If I make this version free, will suffer: Any thing obtained easily it's not valuable + I'll not have time to respond to all support questions, and my company name will suffer.
Emil
Wednesday, February 25, 2004
I know that first impulse is to charge it too low; it's like I'm offering you a Mercedes for 1000$ - "to good to be true, it's something wrong here".
I think that 200-300$/user is a good price for this kind of software. It's not too high and it's not too low.
Emil
Wednesday, February 25, 2004
Are there different types of users of the product? Do you anticipate that in an organisation there will be people who primarily read/search and only a handful that will actually enter the data? In which case maybe you want a way to encourage rather than discourage proliferation by having a cheaper price but maybe there's another opportunity to price it to certain customers... $xxxx for the server and then $xx for each client..
And do you have some more examples of uses?
The trouble I have found with creating a product that appeals to all (horizontal) is that I am now in the position where I have to try and market it and you can't market it t everyone.. you have to pick a small area (a vertical) to focus your marketing. And I don't know which one to choose. Have you thought about this at all??
Gwyn
Thursday, February 26, 2004
Ok, let's make this party a private one.
Thanks for all, guys.
Emil
Thursday, February 26, 2004
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