There are two basic categories of software used in semiconductor manufacturing equipment.
The first category includes the software written for and included with the system at the time of sale. The second category includes software developed after the initial system sale that includes bug fixes, safety upgrades, and performance improvements that improve the yield or throughput of the system itself.
No one can argue that bug fixes and safety upgrades should be given to customers free of charge. But software that improves yield and/or throughput should be sold.
Traditionally, any software developed after a system has been manufactured and sold has been given to customers free of charge. I think that needs to change; we need to start charging customers for software that improves yield and throughput,
lowers costs and increases profits.
There is a precedent for doing this. Capital equipment manufacturers already charge for hardware upgrades. In fact, hardware upgrades are some of the most profitable products an equipment manufacturer can offer. So why not profit from
Here are a few possible reasons.
- We’ve been giving it away for a long time. Software written for equipment manufactured decades ago was basic and really didn’t improve performance. So, it was naturally given away.
- The software comes as an integrated package. It’s difficult if not impossible to decouple performance improvements from bug fixes and safety upgrades.
- There’s an “it doesn’t cost us anything so why should we charge for it” attitude among many marketers and salespeople.
- Equipment salespeople haven’t been trained or required to sell software.
We can change this and start pricing and selling software based on what it’s worth. Here’s how:
- Define the results your performance improvement software delivers, over and above what your customers paid for when they purchased your system.
- Figure out what those improved results are worth on an annual basis.
- Price your software upgrade at 10 to 20% of what those results are worth on an annual basis. If your customer earns an additional $1M per year or more from your software, you can safely charge $100k to $200k, and because the ROI for the customer is between 5X and 10X, a very attractive return by any measure.
- Prove those results are real and worth what you’re charging for them using case studies, customer testimonials, and ROI calculations.
- Stop giving performance improvement software away.
- Find a way to decouple the performance improvements from bug fixes and safety upgrades.
- Train salespeople to sell software.
- Evaluate and pay salespeople based on their software sales results.
Stop giving your valuable performance improvement software away. Figure out what it’s worth, price it accordingly, develop tools and training to help your salespeople sell it, and instruct them to do so. It’s that simple.