At 10:48 PM 11/1/01 +1100, Ian Wilson wrote:
>4) Current upgrade cost from P98 to P99SE is just under USD$2000 - 25% 
>again. Amortised over, lets say, 2 years making about 12.5% per annum.

Actually, the *initial* upgrade price was $995, and, a little later, the 
*promotional* price was $695. Then it went back to $995 for a while. And 
then Protel announced, well in advance, that the upgrade price was going to 
$1495. Likewise, when the retail went to $7995, the upgrade 98->99SE went 
up to $1995. But to make an analogy with maintenance cost, one should 
presume that the upgrade was immediate, so it was $995. If the upgrade to 
the next version is also $995, that would be perhaps 7 percent per year, 
very good. If it is $1995, which is beginning to look likely (essentially 
we would be paying a year's ATS, the upgrade would be included in that), 
that would be as stated, 12.5% per year, in line with industry practice or 
slightly cheaper.

But that was for two years. If we had been paying $1995 per year the last 
two years, we would be looking, perhaps, at 50% of the software cost for 
the core of maintenance, which is upgrade, to get to the next version. If 
Protel issues a major upgrade and not just a marketing package (such as the 
3-D viewer toy), once per year, then $1995 would still be steep compared 
with the standard of 15% per year, but it *might* be worth it. I'm leaning 
toward the view that it would not be worth it and that we should start 
considering alternatives, but Protel could still convince me otherwise.

>5) Upgrade price for PCAD is the same as the upgrade price for 
>P99SE.  This again, would suggest, a more balanced pricing structure 
>between P99SE and PCAD is required.  At USD$2k more (capital cost) I could 
>see many companies moving to PCAD as the annual costs are the same but the 
>functionality is (reportedly) better.

I understand that it is better in some ways, not necessarily better for the 
Protel engineering market.

>6) It seems to me that depreciation vs full write off in the year of 
>purchase does not recompense for the increased cost as you have had the 
>use of half of the upgrade cost for a extra year and the savings due to 
>writing off immediately are savings against the corporate/personal tax 
>rate, not the full cost of the product.

Yeah, the accounting reasons given, at least with regard to U.S. law, did 
not make a great deal of sense. Sure, upgrade might be considered a new 
purchase and thus would need to be Section 179'd or amortized, the latter 
being a colossal pain in the rear and the former being limited to $17,000 
per year (as I recall, if filing a joint return that amount might be 
doubled, but, ah, my memory can sometimes be a bit optimistic), *but* the 
Protel upgrade license policy essentially causes the new license to 
supercede the old license, it becomes not resellable, and one could argue 
that the old license could thus be immediately written off since -- 
according to Protel announced policy, strange as it is, -- the old license 
is not legal to use. Therefore its useful life has ended and its cost 
immediately deducted.

A side comment about U.S. tax law and practice: if a deduction is 
reasonable but merely erroneous, it is not a violation of law to take it 
even if, upon audit, it would be reversed. Only if one takes a deduction 
knowing that it is not allowable could it be a violation of law and more 
severe penalties assessed (or, very rarely, one might be prosecuted). But 
that knowledge is very hard to prove. And audits are rare. By game theory, 
therefore, there is an average gain by claiming whatever deductions one 
thinks are reasonable, and it may not be advisable to ask an accountant 
about it! The fact is that software has a very short life, and upgrades are 
quite equivalent to maintenance costs, and I doubt that this has ever been 
tested in the courts, though I might be wrong since I certainly don't know 

Protel might announce policies that would make the ATS program an 
improvement from our perspective. But they have not done this, so far.

As usual, I am hoping for the best.

Abdulrahman Lomax
Easthampton, Massachusetts USA

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