Re: Proving Correctness (was Java Portability)

[Leif Roar Moldskred <lrm@huldreheim.provida.no>]

Marin David Condic <dont.bother.mcondic.auntie.spam@[acm.org> wrote:
> There are always unusual situations, so maybe I can't say "always" or
> "never", but I doubt you will find many examples where someone pays
> cost-plus and doesn't retain ownership - or some other highly exclusive
> arrangement at least. 

Well, that's why I said "in a few cases" :-) I just wanted to point
out that it make be good business sense to do this, sometimes.

[SNIP]

> Your second case is presuming that I have some specialized knowledge or
> capability that you lack and hence I can charge you whatever I like and
> you'll just accept it because you have no choice. Those situations would
> again be extremely rare.

Well, I don't think it would have to be quite that extreme - as long
as the rights to the software is worth little to you, but much to the
company that writes it, and the writing company is not in a
competition-fierce niche; this way might be advantageous.

To take a fictional example - Cool Cats, a graphical design shop does
a lot of Photoshop work. They've estimated that a particular,
non-existent add-on tool to Photoshop might save them $100,000 a
year. So they call up PhotoPlugins inc., a company that makes and
sells a popular set of Photoshop plug-ins.

PhotpPlugins aren't too keen on the assignment, as they're not sure if
there's really much of a market for this particular plug-in, so they
say "Yes, we can make that - but you will have to cover the
development costs - $50,000 - rather than the price of $15,000 we
would normally charge for such a plug-in."

To Cool Cats it makes sense to accept this deal - they'll get the
product, and save $50,000.

> Why would Company X pay Company Y the full cost of development *plus profit*
> to build them something unless they are going to in the end own it? Why not
> just hire the staff to do the job, keep the product to yourself and retain
> the profit margin that Company Y would make? 

Well, for the same reasons that you would out-source in other ways - it
might be cheaper, faster or otherwise better to pay someone else to do
it, than to do it yourself. You might not have the same profit margin
on this product as Company Y does - and Company Y already has the
infrastructure in place to make it, so they don't have the additional
costs and time to build it from scratch.

And if this difference between your cost of making this, and Company
Y's cost of making this, is greater than the value of the software
rights _to you_; it pays to do it this way. Plus profit is probably
stretching it, but that depends on the profit margins of Company Y.

> I can imagine why I'd hire
> Company Y - maybe I don't have the skills in house - and I could imagine
> cases where it is in my interest to let Company Y have some rights to the
> product, but why would I give up something I don't have to and get nothing
> in exchange?

But you _do_ get something in return - the finished product, which
would otherwise not exist; and that's what you're really interested
in, after all. The value of the software-rights might be worth next to
nothing to the buying company - they might not be in the business of
selling software.

Also, if the development goes over budget or falls flat on the face in
some other way, _Company Y bear the costs_. You pay for the finished
product - you are not hiring consultants to do the work for you; so you
don't pay for the hours - only the final result.

And you don't have to pay in advance either, although for large
project there would normally be some sort of incremental
payment.


-- 
Leif Roar Moldskred