Software Business in the Middle East

In Part I I talked a little about getting profit from consultant work in Dubai. Now let’s talk about having your own product. There are basically three main scenarios about how you define your pricing policy.

1). One License for All Versions

You sell a license and it includes all the updates including major and minor versions with the bug fix. This is scenario used , for example, by Helpmatic. It is the great tool, it is cheap, and the price includes all the updates and new versions. If you decide to sell your product this way, then you simply divide your monthly expenses by the price of on license to get a number of sales you need to have every month to pay your bills.

Although you must think carefully about what new features you include into your next version to attract new customers, it is not such sensitive in order to decide if some features will be included in major or minor version as all your existing customers will get the latest versions anyway.

2). One License for Major Version

You sell a license that includes all minor updates of the version you sell – if your customer buys version 3.0, all updates and fixed from 3.1. to 3.9 will be available for your customer free of charge. This is common scenario for a lot of software, like Vault and FogBugs. Here you get your sales from new customers and also you get some sales from already existing customers who might get attracted to purchase your upgrade package to run the latest version.

One of the important things here is that you must plan very carefully what you add for major and minor versions because new major version will not be available for all of your existing customers. If you release major versions very often, people might get upset as it seems you are trying to get as much money from them as possible for upgrades. If you release major versions too seldom, you might loose a good part of your profit.

3). One License for One Year

This is kind of subscriptions that is normally valid for one year. Good example of it is anti-virus programs like Kaspersky Lab.

You also might sell Support Package or Maintenance Plan for the entire year that includes some additional support service and free upgrades as some of the companies does – this is an addition sales point for the scenario 2) above.

This scenario is what we use in our Drug Database for the Middle East. The license we sell is valid for one year and customer must purchase a new license when the current license expired. If they do not renew the license, the program will start working in trial mode when user is able to search for drugs and see the drug prices, but he is not able to get drug details.

Those customers who have valid license will get all product updates automatically over the Internet as soon as we publish it on our web site. If they do not have Internet (and this is unfortunately still the case for many doctors and pharmacists in this part of the world), we send them updates on CD several time per year.

In our case we have a product specific for the local market, so we can sell it only in UAE, Saudi Arabia and other GCC Countries as well as the entire Middle East. Without having product specific for the market, you software business most likely is not much different from running it from US, Germany or any other place.

What I hope is that selling of subscriptions, or licenses with the validity of one year will bring us customer base that would renew the license each year – especially hospitals that integrate our Drug Database into their Hospital Information System. There will be people who will not want to buy the new license for the next year, but there will also be new customers.

Coming back to my example of a company describe in Part I with monthly expenses of $12’000 – in case they sell the license for $139 per user per year as we do, that company would need 87 licenses sold per month to cover their expenses. Beginning from 88^th license you start getting profit