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Software Agreement Advice

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    Software Agreement Advice

    Has anyone else run into this, and if so, how have they handled it. (I'm hoping Tom Cone is in the vacinity).

    I am marketing my application and I have a customer who wants to base their business on my application. BUT, because I am an independent developer, they are concerned about "business continuity" and the need for a "Master disaster plan". Another words, if something happens to me - like I die or ... - how do they protect themselves.

    They said they would be sending me a contract that would request that if something happened to me, they get the "source code" for the application.

    How have others handled this - its a first for me. I hate to "give away" something of value, since if I die, my family may need some $$$. If they have the code, they could market the software themselves.

    Do developers have arrangements to back each other up?

    I want to be prepared with a reponse or have some other options to discuss when the time comes. I expect to see the proposed contract next week.

    Thanks for your suggestions/comments. It seems to keep getting more difficult to keep things simple!

    Tom

    #2
    RE: Software Agreement Advice

    Tom,

    Some developers do have backups. I know that Steve Workings said he has 2 or 3 persons as his backups and he is a backup for others. I don't know what written arrangements there are but you might want to contact Steve.

    kenn
    TYVM :) kenn

    Knowing what you can achieve will not become reality until you imagine and explore.

    Comment


      #3
      RE: Software Agreement Advice

      Hi Tom,

      What your client is referring to is a software escrow agreement. You can find a bunch of info as well as third-party escrow companies by doing a google.

      Your client is just trying to protect themselves in the case that something happens to you. I have run in to it a few times myself - I worked as an independent consultant for several years before working at Alpha and also own an e-commerce application service provider. This is something usually suggested by an overly paranoid IT manager that doesn't want to get caught with his pants down.

      It's a tough situation to deal with since, as you point out, they can do just about anything they want once they have the source code. This is where a strong agreement comes in to play since you can use it to restrict their use of the source code. Of course this usually means hiring a lawyer and spending extra money before the deal is even closed.

      Personally I find these requests a bit insulting when made by a prospective customer. If they were dealing with a larger organization they would probably never ask this question, yet in reality these larger companies fail at least as often as the small guys. If Microsoft folds tomorrow, are you going to get the source code to Windows, Word and any other MS applications you've purchased?

      Basically you have to consider for yourself if this customer is going to be paying you enough money to make the risk worthwhile. While I don't like escrow agreements, I have entered into them occasionally and have accepted them as part of being a small fish in a big sea. An interesting aside is that not a single company with which I have entered into a software escrow agreement is still around today yet I am :)

      At a minimum, if you are considering signing the agreement that they send to you, have a good lawyer very familiar with intellectual property review it for you first.

      -Lenny

      Lenny Forziati
      Vice President, Internet Products and Technical Services
      Alpha Software Corporation

      Comment


        #4
        RE: Software Agreement Advice

        Thanks Lenny and Ken,

        I'll do a search on Escrow Agreements.

        We are not talking big dollars, or maybe I'm not asking enough.

        Tom

        Comment


          #5
          RE: Software Agreement Advice

          Lenny,

          Your link took me right to the Escrow companies. Never new such a thing existed.

          Looks pretty complicated. A company could just a hire any of you guru's and I'm sure you would be into my code in no time flat.

          I could just give them this BOARD link and they could find someone to pick up after me - not something I want to give a lot of thought to!

          Tom

          Comment


            #6
            RE: Software Agreement Advice

            The idea is that they don't (shouldn't anyway) have access to the source code until some predifined event, such as your business declares bankruptcy or you are hit by a bus. Up until that point, they just have access to your runtime or whatever you are planning to distribute.

            And the agreement should clearly restrict them to using the source code to fix existing bugs, not adding enhancements and certainly not reselling your code.

            You could also set it up so the agreement has nothing to do with you personally but only with your business. So if you should pass away and your family inherits your business and does not shut it down, the predefined event does not get triggered and your family maintains control of your code.

            Also you said you aren't dealing with much money here. If they are paying you just a couple of hundred bucks, they should realize that they get what they pay for. Source code licenses tend to be VERY expensive.

            Lenny Forziati
            Vice President, Internet Products and Technical Services
            Alpha Software Corporation

            Comment


              #7
              RE: Software Agreement Advice

              Thanks again Lenny,

              I appreciate your comments and it gives me something to look at. As far as price, the application sells for $2000 per copy and they are looking at 10 to 26 copies over the next 2 years (probably optimistic).

              They also are going to suggest an unlimited license and want to define a "Maintenance Fee" as a percent of the selling price. Do you have any idea what PerCent is usual given these numbers.

              Again, thank you

              Tom

              Comment


                #8
                RE: Software Agreement Advice

                Maintenance fees vary widely but from what I've seen they are typically 12-20% of the license fee per year (I'm talking about software in general, not Alpha apps specifically). Some maintenace fees just include support, others include point-release updates and others still include all future releases including major versions. These variations of course are reflected in the price. Also some vendors make these maintenace agreements mandatory while many do not.

                -Lenny

                Lenny Forziati
                Vice President, Internet Products and Technical Services
                Alpha Software Corporation

                Comment


                  #9
                  RE: Software Agreement Advice

                  I'm learning lots today! That's good. So maybe Maintenance fees are a good thing for the develop also. I've never charged for support, but I'm very small also.

                  Thanks again

                  Tom

                  Comment


                    #10
                    RE: Software Agreement Advice

                    Hi Tom,

                    Consider giving them free support for an intial period after which you charge an hourly rate or some kind of percentage fee as suggested by Lenny.

                    This is an interesting thread. Thanks for raising the issue.

                    Bill
                    Bill Hanigsberg

                    Comment


                      #11
                      RE: Software Agreement Advice

                      Thanks Bill,

                      I was afraid I was taking up public space for private business, but I think many will have to deal with these issues.

                      I hope Tom Cone weighs in.

                      Tom

                      Comment


                        #12
                        RE: Software Agreement Advice

                        Tom,

                        There are many of us sitting on the sidelines gleaning every word.

                        kenn
                        TYVM :) kenn

                        Knowing what you can achieve will not become reality until you imagine and explore.

                        Comment


                          #13
                          RE: Software Agreement Advice

                          Nonsense. No question you should seek council on this, but if they want an agreement, give it to them. It's called a buy-sell agreement. If something happens to you they get the source code...provided they make the payment as declared in the buy-sell agreement to your estate. Otherwise, tell them to go suck wind.

                          Comment


                            #14
                            RE: Software Agreement Advice

                            A while ago I suggested a professional development thread. This is just the thing I need. Thanks for broaching the subject.

                            Perhaps someone has some advice on how to fairly calculate development fees.
                            Perhaps we could discover ways to ensure that our apps are of a certain quality standard if such a thing exists. I know that there are many ways to skin a cat but it is reassuring to be able to compare the quality of your work against something.

                            Comment


                              #15
                              RE: Software Agreement Advice

                              Greg,

                              We I get the "model" software agreement next week I'll be sure to post it.

                              Tom

                              Comment

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