My business partner and I own a small, but growing software and web
development company. For approximately the past two years, we have
been collaborating with some outstanding overseas providers for web
development efforts; we have a strong relationship with this group,
trust them, and plan on continuing our collaboration with them in the
future.
Though we are happy with the growth of the services part of our
business, our overarching business plan is to utilize profits from out
services division to build a suite of web-based software products.
Eventually, we would like to become primarily product, rather than
service driven and would like to speed this transition along as
quickly as possible. As a means of jumpstarting this process, we've
recently entered into discussions with this same overseas group about
some would-be sales and marketing deals. As part of these proposed
deals, they would develop the products, host the applications on their
servers, and provide support, while we would be solely responsible for
sales & marketing and would bear all costs associated with these
activities. Both parties are generally an agreement on the
overarching roles that would be played, but we are as yet far apart as
regards our respective perception as to what is a fair percentage of
revenues for the developer to take versus the sales/marketing partner
given the roles that we have discussed.
My previous experience in the biotechnology industry (an industry that
I argue shares several similarities to software, particularly with
regard to risks, development cycle, etc.) tells me that
sales/marketing partners typically get anywhere from 60 to 75% of
topline revenues, with the remainder going to the development company.
Our overseas partners are essentially arguing for the exact opposite,
something to which we would never agree, as it would be a gross
abandonment of our fiduciary responsibilities to the company. Having
never been directly involved in software product deals, we are
somewhat at a loss as to what industry standard deal terms are for
situations such as this. This challenge??should you accept it
???would be to uncover some quality information regarding the typical
structure for software revenue-sharing agreements such as this and to
provide as many examples as possible to directly support these claims.
Note that we are not necessarily seeking information that supports my
interpretation of what is fair. Rather, we would like to find out
what the industry standard terms are, as we are sure these terms have
evolved over the years for a number of logical reasons. Basically,
what we want to avoid is having either party feel like they are
getting unnecessarily screwed because we value our relationship with
this particular group and plan on working with them in the future.
Thanks in advance for your thoughtful consideration and informative
responses. |
