Often, I get to hear about a question, "What is the difference you observe, while writing for a product-based software company and a service-based software company?" First, let us look at the business models of the both the companies. The model will have a lot of bearing on how technical writers work.

A product-based company generates revenues by:

1. Selling the product (to different customers, and different product to same customers)
2. Customizing/Implementing the product (may be based on some other product/framework)
3. Providing technical support
4. Providing training
5. Releasing newer/better versions of product with better features

• Provide good quality, better-written documents. Objective is to restrict technical support and training cost.
• Train writers as it is looking forward to a long-term commitment.
• Use the required tools for documentation (considering cost for required number of licenses).
• Maintain quality of documents so the document structure is much better evolved.
• Get optimum output per hour (to restrict the total number of writers employed). So the writing and reviewing processes are elaborate. You will find a "Style Guide" and/or "Best Practices Guide" developed internally.
• Focus in long-term development of the writer.
• Considers outsourcing documentation activity only if in-house writers are not available. When it outsources, it has well-defined expectations about the deliverable.
• Look for Contractors more than freelancers (because of the predictability element)
• Asks writers to prepare estimates, project plans, milestones, proposals and so on. Writers are given more authority and freedom.
• Put writer in touch with its users (though not if the writer is a freelancer/contractor/TWSP resource).
• Expects a writer to understand the user's problems and cater to them.
• Retain the top 30% of the team. It provides opportunities to the middle 50% and tries to get rid of bottom 20% (even if there is no recession).
• Provide a writer an opportunity to acquire business and domain knowledge and become an Individual Contributor.
• Offers much better career growth path and stability.
• Establish an elaborate processes and excellent mapping of Document Development Life Cycle (DDLC) with software Document Development Life Cycle (SDLC).
• Involves the writers from very initial stages of the product and may dedicate them to one or more products. Many companies offer the writer good visibility of what is going to happen to a product in next two-three years.
• Make the writers an integral part of the product group. Such writers do not interact with other writers in the organization.

A Service-based software company generates revenues by:

1. Selling the services (different projects for different customers, or different projects for same customer)
2. Selling Customization/Implementation services 
3. Providing technical support services
4. Providing training services
5. Releasing newer/better versions of product with better features (depending on the company's contract with the client

• Is ready to give good quality and better-written documents.
• Is willing to train writers (as their billable rate improves.)
• Keeps looking out for other type of documentation that can be prepared (and billed for.)
• Involved early in the early stages of SDLC process.
• Is willing to use high-end tools for documentation. Either the client provides the license, or the company invests in it (looking at long-term gains.)
• Is interested in maintaining quality of documents so the document structure is much better evolved.
• Is interested in getting optimum output per hour (to retain client's interest in the services.) So the writing and review processes are much more elaborate. You may even find a "Style Guide" or "Best Practices Guide" developed internally.
• Is interested in long-term development of the writer (add one more to the controversial statements!)
• Considers outsourcing documentation only if in-house writers are not available. When they outsource, they have well-defined expectations about the deliverables.They tend to look for Contractors more than freelancers (because of the predictability element.)
• Ask writers to prepare estimates, project plans, milestones, proposals and so on. Writers are given more authority and freedom.
• Put writer in touch with its client (even if the writer is a freelancer/contractor resource). Company even expects the writer to develop a good rapport with the client, avoid glitches, and get more work.
• Adopt writers to other activities like, testing, UI design, training, proposal writing, and web content writing; rather than laying them off.

No matter how you track, your system should include at least the following:

• Project name
• Nature of the cost (writing, research, phone, etc.)
• Billing rate
• Hours worked

One general formula I have come across is as follows:

1. Determine what annual salary the writer might earn as an employee of the company (for example, Rs. 500,000). Divide the annual salary by 2,000 to obtain a "net" hourly wage (Rs. 250). Double the hourly wage to cover the writer's direct and overhead expenses (Rs. 500). This gives a "gross" hourly rate. Increase the gross rate by 25 percent to cover overhead time Rs. 625. This would be the writer's "billing" rate. Multiply the billing rate by anticipated production hours to arrive at fair payment for a freelance assignment.
2. When setting freelance fees, remember that you get what you pay for. Busy, good professional writers must earn enough money for their time to maintain a profitable business. If you offer less, you will have to settle for beginners or non-professionals, who will likely require more editing, rewriting, fact-checking and time on your part.
3. Professional writers will expect payment on acceptance of their work. For major projects, they may require one-third to one-half upon undertaking the job, with an additional payment midway through, and the balance upon completion.
4. Payment amounts, date of payment, and rights purchased can all be negotiated. If you "take" in one area, expect to "give" in another.
5. When negotiating payment, consider the value of the material to your publication, its value if it were to appear in a competing publication, and the value to the author in appearing in your publication.