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Ask HN: Project based pricing or try and build a Saas app?

11 points by xm1994 ↗ HN
Don't know which way to go on this one, client needs a work order + inventory app. I was about to simply quote a price for a bespoke app, then thought why not charge them nothing... build the app ourselves and have them subscribe to it as the first customer. I would ask that they pre-pay a year on sign up.

One possible issue arises if they decide they don't need it after I've already paid to build it.

There has been a lot of discussion on project/value based pricing vs hourly, but how about we throw subscription based pricing in as a third option?

Thoughts or suggestions?

6 comments

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patio11
What did they offer you such that "Work for free and bear all project risk" is an attractive option?

1) Charge for bespoke development as per usual.

2) Negotiate such that you own the IP after the project is over.

3) Use the IP to build the SaaS.

4) If they want to migrate to your SaaS and take advantage of ongoing improvements for your standard monthly rates, wonderful. If not, maintenance at your prevailing contract rates or via a negotiated maintenance contract.

xm1994
Letting them pay for development and keeping the IP would be the best of both worlds and I should try for that. If it's not an option my thinking was I get free domain knowledge via access to their employees and business processes and a baked in customer for the saas. I have plenty of Saas ideas with neither of the two where I could possibly be completely wasting my time.
tptacek
Your client just wants their business problem solved. If they are a reasonable client, unless they made it very clear to you up front, they do not want to be in the business of designing, implementing, testing, distributing, supporting, and maintaining supply chain management applications.

They want order management capabilities they don't have. They want to get those capabilities without hiring 1-3 more full-time people, each at a fully loaded cost of between $120-250k, all of them with ramp-up time and each with a 33+% chance of not working out.

Solve their business problem, collect your rate, and feel comfortable that you've generated a win-win. Get your contracts reviewed by a lawyer (you should keep a lawyer on hot standby for contract review all the time) and make sure that you retain IP. There are lots of different structures that accomplish that.

It is a good thing that after completing this engagement, you will be well positioned to offer this service to a next client, and a next, and even "all" the clients at scale using a SaaS offering. It's what makes you a valuable consultant. You should not be entertaining the idea of giving your services away simply to capture the side effect of getting better at delivering supply chain products afterwards.

Incidentally: something that I am continuously learning the hard way, even as I tell myself every damn time that I know this, but then proceed to make exactly the same mistake again and again: free has a negative signaling value in consulting. Don't do free. Free is terrible. It scares buyers, generates more uncertainty than it dispels, and it sets you up to fail.

By all means, help people out gratis, do favors, be accessible. But when your client needs something done, put a price tag on it or pass the work up.

xm1994
You're both right. I will make it clear I want to retain the IP while offering them a permanent license with a maintenance contract. That, and have a lawyer write it up.

The thing is I always want to retain IP when contracting out work, but that's because I'm always thinking about re-using or re-selling the work. I've been working on my own projects so long that I wasn't thinking about this from the customer's POV. They are not in the software business and just need their problem solved.

statictype
If you plan on making a SaaS product, what is the target market you plan on selling to?

Small businesses? FM companies? Large organizations?

Are they the type of market that would look for a subscription based service or will they seek a more traditional sales channel with hand-holding?

How do you plan on handling the actual process flow for work orders? Each subscriber may have a slightly different way in which they want it to work.

It could certainly be possible that you can build and sell an SaaS product but you may want to do some market research first.

(Disclaimer: Our company sells FM related software and WO and Inventory Management is one part of it.)

xm1994
The requested solution is to manage the warranty repair order process and related parts inventories at multiple 3rd party authorized service centers for a manufacturer.

My (possibly naive) idea is to build a re-usable solution that is something like a desk.com CRM app with an inventory module and the ability manage pre-defined services.

Target market? Could be another manufacturer like my client, or service/repair centers by themselves.

There are lots of GREAT CRM/support services: desk.com and zendesk.com just to name a couple. It doesn't seem like I can tie parts to their support cases for the inventory management aspect of the solution.

The closest I can find is this force.com app: http://www.servicemax.com/products/inventory-and-parts-logis...

If I can make the workflow flexible enough to cover different cases this could be even be extended to work as a field service tool by later adding a scheduling module and a maps/routing module for field technicians.