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COGS for Software Companies

  • 08-05-2015 4:07pm
    #1
    portcrap
    Registered Users, Registered Users 2 Posts: 296 ✭✭


    Hi,

    Having trouble isolating the line items for establishing the COGS for my forecasted P&L. It is a software company based on developing SAAS products.

    I assumed that direct developer time or outsourced development costs would contribute to COGS, however some research has shown this is not the case. The only things I can include are hosting fees, server fees, implementation / support costs and third party web service fees. This really skews the GPs and mean they are running at approximately 90%.

    Can this be right?

    Thanks for any help.


Comments

  • #2
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    Looks at some software PLCs many do not report GP but go straight to OP - if they do it will be in excess of 90% gross margin.


  • #3
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,718 Mod ✭✭✭✭Jim2007


    portcrap wrote: »
    It is a software company based on developing SAAS products.

    Well speaking as both a CA and a software engineer, I have to ask what does that actually mean in terms of software development and delivery as opposed to the marketing hype.

    Have they got a software suite that they developed and are licensing it for use via SAAS environment that they have set up and run themselves? If so then you will really need to get a break down of the developer input to be capitalised versus the support type work they do.

    If on the other hand the company has a bunch of open source products or similar and all they do is customise it and run it on say AWS, charging clients for access, then most of the developers time is operational costs...


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