American History 1988
Chapter 114 - 108: Behind the Trade, There’s Another Deal

Chapter 114: Chapter 108: Behind the Trade, There’s Another Deal

"Alright, Dean, let’s talk about how to deal with this software now," Clark dropped the investment topic when he saw Dean avoiding it.

He was indeed tempted by Teams and optimistic about its prospects, but the market needed to further prove it.

Moreover, Clark had never been involved in venture capital, even if he wanted to make a personal investment, he needed to understand the rules of the game first.

The last step of the sales pitch had finally come, quoting a price.

When potential customers have listened to a detailed introduction and then ask you about the price, it means they are interested.

"Mr. Clark, before I give you an official quote, please allow me to ask one question," Dean pulled out a flyer from his laptop bag, "How many employees does Silicon Graphics have now?"

Clark thought for a few seconds and gave a rough answer. "There are about a thousand in North America, and over four hundred at the headquarters in California. For the number of employees worldwide, I would need to check with my assistant to give you an accurate answer."

"Wow, as a computer systems company, that’s undoubtedly a huge scale." Although Dean knew Silicon Graphics’ market value was close to one billion US dollars, he was still surprised by the scale.

"OK, let’s say a thousand. The annual expenditure of SGI on office software like Lotus1-2-3 is..." Dean did some quick calculations with the flyer he had, "about 500,000 US dollars, right?"

"About that," Clark shrugged, he was familiar with the figure, having just approved the software expenditure budget for the next year.

"The selling price of the spreadsheet Lotus 1-2-3 is 495 US dollars per set, the word processing system WordStar is 295 US dollars per set. The most basic desktop database software dBase is priced at 379 US dollars, even the outdated VisiCalc can sell for 250 US dollars."

Dean shook the flyer in his hand, "This is the flyer I just picked up on a whim when I passed by ’Arrow Computers’. Honestly, I was startled by the software prices listed on it."

As a computer geek, Dean had never paid for software before, of course, that was when he was in Ohio.

But even so, he was shocked by such steep software prices, a few hundred US dollars was enough to buy a computer.

Yet, that was not the most surprising thing for him. On this price list, for different versions and systems of software, the prices varied, with the most expensive being up to over eight hundred US dollars.

Damn! Once the market opened up, the software business was simply a gold mine. No wonder companies like Lotus and Oracle reached market values of over ten billion US dollars in just a few years, and it wasn’t all due to overheated tech stocks.

"So Teams is going to surprise me with its price, isn’t it?" Seeing Dean’s reaction, Clark’s expectations soared again.

Faced with his question, Dean held up two fingers. "Teams has two versions and two pricing options."

"First: the standard edition, 149 US dollars for a one-time purchase, rights only apply to the current version, and significant upgrades would require a new purchase.

Second: the VIP edition, 199 US dollars for a one-time purchase, with rights similar to the standard edition, only applicable to the current version.

These are the traditional pricing options for Teams, but to offer users more flexibility, we also have an annual subscription model."

Dean took out the software’s second pricing option, which was completely different from the previously mentioned lump-sum purchase.

"Under the annual subscription model, the standard edition is 99 US dollars per year and the VIP edition is 149 US dollars per year.

Customers who purchase this service can subsequently enjoy all the upgrade services for Teams for free. Whether it’s regular upgrades or all-new version upgrades, all of this comes without any extra fees.

Of course, with the annual subscription model, users can decide for themselves how long they want to use the software. Byte Software will not interfere in any way with the decision to renew or cancel."

Dean handed Clark the printed price list, "This is the detailed explanation of rights and subscription rules, with the differences between the standard and VIP services clearly laid out."

The standard edition only supports Teams’ most basic functions, such as one-on-one voice calls, and there are limits on file transfer size.

The VIP edition, on the other hand, is the full version of Teams. It not only supports multi-person conference modes but can also accommodate up to a hundred people in a channel, and offers more efficient after-sales service than the standard edition.

Clark looked at the price list in his hand and didn’t hide the surprise on his face. He could understand the lump-sum purchase model, as that’s the mainstream way of selling software now.

Each version has a set price, and if you want to experience the latest version, you have to pay again. Of course, you could also keep using the original version without upgrading, in which case the software company wouldn’t make another penny from you.

However, this option is basically out of the question for enterprise users.

Now, the annual subscription model Dean proposed had opened a new world for Clark. Software sales could be approached this way?

Subscribe on demand and enjoy free version upgrades. It must be said that this appeals greatly to enterprise users, and the most important thing is that the price is much cheaper than the lump-sum purchase.

Take the word processing software WordStar as an example. With every version upgrade, you need to repurchase. Although the price is always 295 US dollars, the cumulative cost after several versions is not an insignificant amount.

The annual subscription model ensures that customers can enjoy the latest version every year, but the cost is reduced by about one-third. At least on the surface, this seems like a very good deal.

Especially for enterprise users, the annual subscription model is clearly the better choice.

Of course, it’s not without drawbacks. While the subscription model gives the choice to the users, as soon as they cancel the renewal, Teams will no longer serve them, and they won’t even have access to the most basic functions.

The pros and cons are clearly on display, and the choice is entirely up to the user.

"Dean, it wasn’t just Teams that opened my eyes," Clark placed the quotation back on the desk, "Its sales approach is equally impressive."

"To cater to the different needs of our customers, we are willing to make various changes," Dean replied with a smile.

His pricing strategy was not without reason, as smaller companies might be more inclined to choose a perpetual license. After all, they only needed to pay once to enjoy Teams’ services forever.

For medium and large-sized companies that exceed a certain scale, an annual subscription provides better value for the money.

"From the user’s perspective, I’m happy to see such changes," Clark picked up a calculator from the desk and pressed a few buttons, "Very well, an annual expense of less than 60,000 US Dollars gives me no reason to refuse it.

"We can start with a one-year VIP subscription at the headquarters in California, and whether it will be promoted across the entire North America Silicon Graphics depends on its performance."

"Mr. Clark, Byte Software will fully support SGI headquarters’ training work. If needed, we will definitely respond to post-sales service within 24 hours." With Stanford being only about 6 miles from Silicon Graphics, Dean could even offer service on a little donkey.

"Good, when can I run Teams on my own computer?" For an expense of 60,000 US Dollars, Clark didn’t even need to get approval from the board.

Considering what Silicon Graphics spent annually on Lotus software, which was close to 500,000 US Dollars, Clark believed that Teams could be just as helpful for work, but at around one-tenth the cost of Lotus.

Even if Teams performed poorly, Clark wouldn’t lose much, considering it a chance for the Stanford student before him.

"The Teams 1.0 version has been developed, and we can guarantee to install the software on every computer at SGI within a week."

All they had to do was upload the installation package to Silicon Graphics’ main server, and then employees could directly download it from there. Afterward, Dean would activate the software in bulk, and thus Teams would be fully deployed.

The company’s internal LAN ensured that this process would be completed in a very short time and also ensured the smooth operation of Teams.

"I like your initiative, Dean," Clark picked up the phone from the desk and dialed an extension, and after a quick instruction, he turned to Dean, "I’ve spoken with the legal department, and we’ll sign an intent agreement today."

Dean and Marcus exchanged an excited look, as if their goal of one hundred had already been exceeded.

"Mr. Clark, this is the biggest recognition Teams software has received since its development." This time, Dean’s gratitude was sincere—it was indeed a milestone worth commemorating as their first customer.

"When we talk about our second deal, I hope you won’t refuse," Clark said directly, waiting for a response.

A second deal? Dean instantly understood the additional implication in Clark’s words.

Alright, a second deal was apparently required as security for the transaction.

"If there comes a day when Byte Software needs it, we won’t refuse Mr. Clark’s participation," Dean made his promise.

"Deal!" Clark promptly gave them an order for 400 software licenses.

As Dean and Marcus were preparing to leave Clark’s office after completing their first deal, Clark reminded them at the moment they were stepping out the door.

"Dean, I suggest you make sure Teams runs smoothly because this affects Silicon Valley’s first impression of it."

"I will personally take charge of SGI’s installation work," Dean nodded seriously, taking on the responsibility.

Once they were outside of Silicon Graphics’ doors, Marcus couldn’t help cheering. "Shit! Dean, 400 licenses! Is Professor Clark supporting us because we’re Stanford students?"

"That might be one reason, of course provided our Teams is cool enough~" Naive as he was, Marcus had no clue about the other deal involved.

But that was not his fault; Dean had not discussed Teams’ financing issues with anyone.

"Marcus, when we get back, we need to rent an office for Byte Software," Dean suggested.

"Garage! Byte Software’s first office has got to be a garage!" Marcus didn’t hesitate in making his suggestion.

"Why?" Dean asked, curious.

"Hewlett-Packard! Apple! They all took their first steps from a garage, and BIT Software will be next!"

"Alright~ our first office will be a garage!" Dean agreed with a laugh.

"By the way, Marcus, maybe we should also hire a formal employee for Byte Software."

"Wow~, that’s faster than I imagined."

"Should we hire a passionate California girl for clerical work, like answering phones and managing deliveries?"

"I Agree!"

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