Calculating the True Price of Software

Interesting analysis on what goes into the price of software: Calculating the True Price of Software. Points out things like the value of enterprise software is less if you can’t buy maint or support on it, thus the inherent value of the s/w is less than the list price, as the list price factors in the option to buy maint and support.

Now, in this case, the maintenance and support is already priced separately from the license. Doesn’t that mean we’re already done? Perhaps. Let me suggest that even though you’re buying and paying for the maintenance separately, there is an option embedded in the license. When you buy the software license, it includes “options” to buy maintenance. (I use options in the plural, because I’ll look at an option for each year of maintenance.) Let’s separate that out. That is, we want to price the license without the options to buy maintenance and the options to buy maintenance.

As a side note, it has a link to an article on Black-Scholes option pricing which I’ve been meaning to try to understand.

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