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What's the normal markup for the price of an appliance from a software vendor? The appliance comes loaded with an image that has their application and server. The cost of the software and support license is separate. It's co-located at our facility and leased for however long we maintain a software license (indefinitely). The total cost of the appliance is paid in installments over several years. They bundle for free all the required software and dependencies, though a lot of it is open source.

The vendor is small to mid-sized (not an Oracle or SAP but also not tiny) and a leader in their niche market.

As part of the price, they also provide:

  • a warranty against defects, failure, damage, and theft unless caused by us
  • on-call or office hardware support 24/7
  • all maintenance, troubleshooting, etc as the device is considered a black box to us

Example, if Dell sells the server for $1,000, is a 15x markup reasonable (vendors leases it for $15,000)? If it matters in this example, assume the total amount paid to the vendor for the project, including appliances/software/support, is $1.0 million.

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closed as off topic by Zypher Feb 9 '12 at 4:49

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Sorry if this is off-topic for this site, but I thought it's a close enough fit. –  Dan Feb 10 '11 at 15:47
    
Although it's really just the total project cost that matters, we would have the option of getting a VM appliance with no support for free. –  Dan Feb 10 '11 at 16:23

1 Answer 1

It depends on the value of their application (and presumably continued support/maintenance.) The price of the server hardware has almost nothing to do with it.

You think that the retail price of MS Windows or MS Office has anything to do with the cost of burning CDs?

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The cost to license the software is separate and on the order of hundreds of thousands USD. The appliance is just how we get and deploy their software. –  Dan Feb 10 '11 at 16:03
    
Then in that case, unless they are doing all management of the machine, that's an unreasonable markup - assuming it's per year? You didn't say if it's $15k a year or $15k a month. Even if they are doing all the management of the machine (OS patches, new users, etc), and that lease cost is per year, that's pretty steep. –  mfinni Feb 10 '11 at 16:06
    
Mfinni,I clarified my question. Thank you for the feedback. –  Dan Feb 10 '11 at 16:10
    
I don't know, if you're paying for the software, licensing, and support outside of what you're paying for that appliance, how are they justifying the $15K price tag? –  gravyface Feb 10 '11 at 17:04
    
Well support paid for outside of the appliance is just consulting pertaining to initial implementation and upgrades. Support for the appliance itself is included. I agree with commenters that $15K seems high, which is why I posted here. –  Dan Feb 10 '11 at 17:24

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