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Control systems are like computers, but sometimes less so. For the current discussion, it can be assumed that some custom effort maybe needed to make the same code work on different platforms.

With that background, my problem is: how do I estimate the value of my software for a specific control system? For example, if I made the software for a car's control system, how can I go about pricing it? When someone buys a car, how can we know how much they are paying for the software vs. the hardware?

One approach is the Cost of Goods and Services (COGS) approach, where we estimate the effort that went into making that software. Are there any other approaches, that take into account the value added by the software?

i.e. let's say this software does something better than what is currently out there. How can the value estimation process capture such value additions?

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    It is almost impossible to measure with money, intangible benefits like comfort. For example how much value does an aircondition give to a car owner. A more feasible target will be : what is the average money people are wiling to spent for an aricondition. – DesignerAnalyst Aug 31 '17 at 8:39
  • @DesignerAnalyst: That is the first part of the question. i.e. how can I decouple the value of software in a system ? For example, when you buy an AC, how much are you paying for the software vs hardware ? I want to know if a guideline or a rough metric exists for products, i.e. some systems are more software dependent than others like in phones, laptops, etc, the software is more important than AC. – Chintan Pathak Aug 31 '17 at 22:52
  • Market value seems nearly impossible to estimate (i.e. if you could, you'd be golden). You could estimate what it's worth to them compared to what you know about your client and your competitors. – Alper Oct 30 '17 at 10:29
  • @Alper: Information about competitors may not be easily available, and is also a moving target. – Chintan Pathak Nov 17 '17 at 19:55
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If you are a projects company, you tend to go with COGS or its variation. Value of software, or anything for that matter, is subjective. Nevertheless, as the organization developing the software, it all depends on your business model, the market, demand, etc, and common sense as well as business acumen.

how do I estimate the value of my software

This isn't really a project management issue. Project costing is, but how much you sell your product/code for is not, IMHO.

You can check this article out as a starting point: http://www.avangate.com/avangate-resources/article/Pricing-your-software.htm

  • What I want to try to understand is, how to get to the value and not price. Price is how much one charges for the product, and value is the output that product brings to the customer, which in turn should justify his investment for the said price. I agree though, maybe PM is not the right forum. – Chintan Pathak Aug 30 '17 at 17:30
  • I see what you mean now. This really differs case from case. I have in the past, as a presales engineer, worked with account managers and sales people to estimate the ROI for our client. So as an example, we once pitched a cross platform software solution and calculated that the client with cut their hardware/infrastructure costs by 30%. There is no magic formula. Spend time with your client, know the market and estimate the ROI for each client. – Muhammad Aug 30 '17 at 18:52
  • Yes, what we want to try to do is show to our 'potential' customers that they will have a positive ROI. Keyword here being potential; we may not have (enough) communication with them apriori. – Chintan Pathak Aug 30 '17 at 19:13

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