SOFTWARE RIP-OFFS!

eric kofid kofoid at biology.utah.edu
Fri Jul 29 17:56:15 EST 1994


In article <Ctnt0x.DBt at usenet.ucs.indiana.edu>,
gilbertd at sunflower.bio.indiana.edu (Don Gilbert) wrote:
> 
> Sean,
> 
> I believe you are wrong about a few thousand US$ being an excessive price
> for software developed for a niche market like molecular biology.
> Widely used commercial packages like wordprocessors can afford to sell 
> for few hundred dollars because of the hundreds of thousands or millions of
> packages sold per year.   The expenses to produce a good piece of software
> and especially the ongoing expenses to market it (e.g. to make sure some of
> you actually buy it) are very high, regardless of whether you sell 100
> or 100,000 copies.  When I was an independent software developer and
> tried selling my software commercially, the advertising costs alone
> were enough to keep me from getting anywere: several thousand for one
> small, back of the magazine ad (the kind almost no-one reads) in one
> issue of one computer magazine.
> 
> The molecular biology software companies do not sell 10,000/yr copies
> of their software.  The market isn't that large.   I don't really
> know the size, but I'd say 2,000/yr was a high number for a popular
> molbio program.  Let us say it sells for US$3,000.  That yeilds US$6,000,000 
> gross income.   Of that normally more than 50% will go toward
> advertising and marketing (required to generate that many sales!).  It 
> may well be that 70% to 80% of gross income goes to marketing expenses
> to generate those sales in the software business.  Have you ever
> looked at the profit margins on some of the big software companies?
> If I recall, Borland had sales around $150 million a few years back with
> a profit of only a few hundred thousand (and they may well be losing
> money this year).
>    
> Any complex software today requires many programmer-*years* to develop.
> Estimate $100,000/developer/yr including fringe benefits (this is probably 
> a low estimate, but more than I earn:),  with an estimate of 6-person-years 
> to develop (widely used commercial packages would involve at least 10s 
> of person-years if not 100s).  Add in the cost of various technical 
> writers, support personnel, etc.  It adds up to where any profit is only 
> a small percentage of the total income.  And if a given package isn't 
> popular, you loose money on it (paid for from profits on a popular 
> package).  Only if you sell lots more than expected do you see 
> significant profits.
> 
> This is all my rough estimation from the time when I was a very poor
> independent developer.  Some software companies do make profits.  But
> the mol-bio market is such a small one, and the required price for
> software packages to meet the basic marketting and development costs
> are so high, that it will remain a risky and uncertain market in my
> opinion.  I don't have hopes of selling any of my software in this
> market. 
> 
> 
> -- Don
> 
> 
> -- 
> -- d.gilbert--biocomputing--indiana u--bloomington--gilbertd at bio.indiana.edu

Don --

Don't be so hard on yourself. Expect a check in the mail as soon as SeqApp
or SeqPup are finished. You certainly deserve it!

Cheers,

Eric.

--------------------------------------------------
Eric Kofoid          --- "No, it's so...
                     ---  hot out there."
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