I have an opportunity to license a Python module to several major banking institutions—some of the largest in the world. Typically, we offer this software as a web app, but these banks need a local module to run within their own environments.<p>Here's the situation:<p>- Product: A Python module that performs complex analysis on source code and generates a risk assessment.
- Usage: It will be integrated into their CI/CD pipelines, and developers can also run it manually.
- User Base: About 50 users per institution, mostly small, specialized teams.
- Updates: We'll provide quarterly updates as we continue to develop the tool.<p>I'm trying to figure out how to price this. I don't want to set a price that's either prohibitively expensive or too low, especially since I haven't licensed source code to clients of this scale before.<p>For those with experience in this area:<p>- How did you approach pricing in similar situations?
- Are there industry standards or benchmarks for licensing software modules to large banks?
- What factors should I consider when negotiating pricing and terms with these institutions?<p>Any insights or advice would be greatly appreciated!
I can think of these questions<p>1. Who are competitors in this space and what do they charge for business or enterprise?<p>2. Why do these banks pick your solution over others?<p>3. What is a reasonable price point including your own costs that make this desirable for them and feasible for you?<p>4. Pricing model, will you bill like a SaaS or a yearly subscription? What about users leaving, adds and changes?
Probably the real cost is in providing adequate ongoing support, and possibly insurances, and I suspect the banks know this and might baulk at too low a figure.<p>They don't want to be left holding the bag.<p>So I would have thought a risk based approach to the situation would be in order, especially given the nature of the situation.<p>What will it cost to get external validation services performed to check the code?<p>What could it cost if you had to pay consultants to do what would be needed if there was an error or a breach associated with the module, in terms of analysis and rectification?<p>What will it cost to have people available who are familiar with the code to make any changes that might be requested?<p>What will it cost to develop the code further and stay in front of competitors or attackers?<p>What will insurances cost, given the possible losses and probability a loss could occur?<p>Will you be limited to exclusivity? e.g. not sell to other banks who might be competitors.<p>Given the above, will you need to have dedicated premises and infrastructure?<p>So what, 5-8 people at reasonable wages for skills and experience, plus insurance, premises, infrastructure and other factors, like keeping people interested to stay working for you in a maybe boring job? Plus actually make some profit and stash some cash for a rainy day or another development opportunity to pursue.<p>Starts to sound like 1-3 mill a year all up is needed to run it as a going concern, if you are going to do it properly and depending where you are based. Maybe more if insurances are expensive.<p>Otherwise, are you sure you can't sell them the IP and walk away?
Do you charge for the web app version? I'd expect the module version to be somewhat close to that?<p>Also make sure to expect a lot of pain working with IT at the banks. I worked with some people at US Bank and their restrictions were absolutely draconian.<p>For example, I had to make a vanilla version of the python tool I was working on for them because they had to review every one of my dependencies! I also couldn't send any kind of zip file to them so I ended up making a plain text encoding/decoding scheme so I could attach code distributions to emails.
You want to (among other things) think about these things:<p>1) What's the value of the software to the bank?
2) What other options do they have and what are the costs?
3) Is this a one-time license or something ongoing?
4) What level of support are they going to want/need and what will it cost to provide.
Two engineers @ $150k/year for redundancy<p><pre><code> $300k
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2x cost multiplier<p><pre><code> $600k
</code></pre>
100% markup<p><pre><code> $1200k
</code></pre>
16% discount for 5 year contract<p><pre><code> $5000k @ $1000k/year
</code></pre>
Plus expenses marked up with overhead and profit in order to travel to their site.<p>It is not your job to save customers/clients money on <i>your services.</i> Charge enough so it is worth staying in business. That’s what banks want. If you aren’t making a bunch of money, you are a greater risk for theft. Good luck.