Essay Question Two

You are a developer of The Billing System ("TBS"), an application for tablets and phones to manage billing for law firms and accounting firms.Your application allows attorneys and accountants to track their time, allocate their time to particular client accounts, generate bills and process payments.You sell the app for $100 per firm and $20 a month per individual user.The clients of the user's (accounting and law firms) can also use the app to track their bills in real time.

You were making $80,000 a year as a programmer before going out on your own.TBS really took off, netting you $95,000 in your first year and $115,000 last year.You expect to net around $145,000 this year.You are doing well as an independent app developer.

One of the best parts of your success is that your clients pay through the app store, which frees you up to write code and market.Unfortunately, customer support email and chat forums are a hassle.No matter how much information you give your customers or add to the web site, your clients still view their problems as unique and deserve special attention.Customers can be a real pain in the butt.

Between handling customer support, slowly revising, and adding functionality to your app, you have also been developing a new product named Dog Whistle.Dog Whistle is a meta-search program that stores user preferences and search histories locally across their computers, tablets and phones.It then uses the information to optimally search public databases and other search engines to produce more accurate and comprehensive searches, while enhancing user privacy.In effect, it makes your internet searches more comprehensive and specific to the user's needs.The method behind Dog Whistle does not violate copyrights, patents or other terms of use of the search engines it accesses.You expect that Dog Whistle will be ready to roll out to the market in six to ten months, depending on the time you have to devote to it.

You think that Dog Whistle is attractive, but do not believe that you will be able to successfully market and distribute the product.While Dog Whistle competes with other higher price programs, your most obvious competition will be existing search engines which get their revenue from advertising, not product sales or user fees.

You have no experience in or desire to learn the software publishing business, nor do you have an interest in hiring experts and staff on your own.Instead, you want to partner with a firm that respects and understands your technology and will look after all the pieces of the puzzle that you cannot or are not interested in managing.In short, you want to focus on writing code and let someone else worry about how to market, sell, distribute and provide support for the app.

You know of one primary company that meets your criteria: Digi Key.You have been following Digi Key since you became interested in computer programming in high school.The company got its start in the mid-90's and has extensive experience in specialized internet tools. The company expanded its business beyond its niche area to publish software of talented programmers who do not have the resources or expertise to bring products to market on their own.The company grosses over $200 million a year.Sara Silverman, the owner of Digi Key, is a legend in the programming community and has a reputation for making fair publishing deals.Sara is also something of a personal idol to you, and someone that love to work with.

At a software convention last year, Tom Tran, a developer of an app to help disabled people travel abroad, bragged to you about a deal he made with Sara.He received a 20% royalty of his app's net sales and a $200,000 advance against sales when he first signed.That sounds like a decent value proposition to you with Dog Whistle, especially when the revenue would be on top of your TBS business.If given a choice, you would prefer to receive a higher royalty rate and get less money up front.Ideally you would like at least a $300,000 advance, but might be agreeable to an advance as low as $75,000 if the other terms were right.With that said, you are determined to retain the most royalty as possible, and you will, in no circumstances, allow a royalty rate under 30%

Money is, however, only one concern.Time is also an issue.You are increasingly worried about your ongoing neglect of TBS.You have not updated TBS for almost 6 months and need to fix a series of bugs.Two new competitive apps have also recently launched.You do not want your clients to think that you have abandoned your program if you go "corporate" with Dog Whistle.Now is the not the time for a drop off in your TBS business.You also realize that you need to focus on Dog Whistle.There simply is not enough time to do everything well.

You really want Dog Whistle to be more than just financially successful. If successful, this product will establish your reputation as a leading software designer.This could be your ticket into the big time.You have always dreamed of having her as a Sara Silverman as a mentor and think this is your chance.

Finally, it is important for you to have a fair process in place that will allow the parties to address conflicts quickly and, hopefully, without litigation.You are concerned that Digi Key will be able to take advantage of the fact that it is the larger company.

This afternoon, you are flying to meet with Sam Thompson, an Assistant Vice President of Business Development at Digi Key.Although Sam is not Sara herself, you realize that you need to get in the door first.You expect to return home with a good deal for Dog Whistle.

A.How do you prepare for the meeting?Be thorough and specific with your answer.

B.Describe the strategy you will use in the negotiation to reach your end goal(s)?Explain why you have chosen this strategy.