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A large company not want to license my custom-built software


#1

A well-known large company contacted my company to build a customized version of our software. The software is a tool that helps some users using the company’s product. They sent me their customization requirements, which are extensive. Then I gave them the price quote, which includes NRE (non-recurring-engineering cost), software licensing and support fee. Now they came back to me saying that their intention is not to license the software once it is finished, but the software stays with my company and my company is to release it to the open market. They say that the users of the final product will be outside of their firm, so my company will deal with the licensing issue with those users directly. I am puzzled. I have done licensing deals before, but have never heard of this. A few questions come to my mind:

  1. I do not have control over their users, how can I market the product and justify the costs associated with this marketing effort? Their users are not the target of our general product.
  2. Who would determine the product price if I were to deal with the licensing to those end users? I do not know these users. I do not think I can get enough revenue by selling the software directly to these end users.
  3. Is it a normal approach? It sounds strange to me. Why does the company ask for it? For saving licensing fee?
  4. The customized version of software will include the large company’s APIs as well. So in their approach, legally and strangely, it is my company should pay a license fee of these APIs to the large company, not the other way, right? What?
  5. If there will be no software licensing from the firm, how will the pricing structure change? Will my company lose the licensing fee?

Any comments and suggestions on how I should respond will be appreciated.


#2

Are they expecting you to sell or give away this software you create?

Presumably because they think your software is going to add value to their product.

Are they going to give you any help to promote or support this product?

Sounds very strange. Maybe they got to be big by taking advantage of small companies like yours?


#3

Sounds like they want you to do potentially a large amount of customizations for them but don’t want to pay for it. Unless you really think the new features would be good for the product and generate more users I would say no.


#4

They expect me to sell it.

Some support for their own libraries.

It’s strange. They may have their own perspective. I have to gather more information to make a judgement, but they do not directly tell me their motivation.


#5

It doesn’t sound great on the face of it, but I would probably keep talking to them to try to find out more.