You Don't Have To Sell Software

from the seriously dept

Reader Philip writes in to ask about our thoughts on a commentary on News.com by Dave Rosenberg concerning Sun's open source strategy. Rosenberg seems very concerned that Sun has decided to forego trying to sell software directly:
Sun's approach--at least the way I'm reading it from Jonathan Schwartz's statements, is about making the software totally free and trying to sell support and hardware. This clearly diminishes the value of the products and doesn't offer a mechanism that encourages people to pay for software.
It's difficult to see what Rosenberg is worked up about here. Sun seems to be following pretty closely an economically sound approach to a market: using infinite goods (software) to make scarce goods (hardware and services) more valuable. That's a lot more reasonable than using infinite goods to try to get people to pay for more infinite goods. There's no reason why Sun needs to encourage people to pay for software, and there are many reasons why they should not try to make people pay for software.

Yet, for some reason, Rosenberg seems to think that this strategy is somehow damaging to the open source movement:
It also puts an unnecessary burden on the notion of open source--such that if Sun is wrong, everyone else will look wrong too.
Why? If, as Rosenberg notes elsewhere in the article, Sun's open source strategy is different than other companies', then such a failure should be seen as a failure of Sun's model, not a strategy of embracing open source. There are plenty of reasons why Sun may (or even is likely to) fail in this endeavor. The Sun brand name has been tarnished. People may not find the hardware or services Sun is selling as providing enough value compared to alternatives (even with the software included). On the whole, it's not clear what's compelling about Sun's offer compared to the alternatives, and that's its biggest challenge. But that hardly reflects poorly on open source software or on the idea of not selling software.


Reader Comments (rss)

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  1.  
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    Crosbie Fitch (profile), Nov 26th, 2008 @ 6:50am

    Sounds Like They've Given Up Selling Copies

    It sounds more like they've given up selling copies of software - which is pretty sensible.

    I doubt they've even tried selling the software - so that would preclude them giving up what they haven't started.

    At least MicroPledge.com tried enabling people to sell free software. Their hiccups in doing so are disappointing, but not yet a gravestone on the idea.

     

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    Mark K (profile), Nov 26th, 2008 @ 6:59am

    I still have a hard time grasping how you get started with this model. How do you convince a developer to work for free, while you are waiting for people to adopt the software?

     

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    Anonymous Coward, Nov 26th, 2008 @ 7:02am

    Re:

    That's a good question. How did RedHat start?

     

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    Anonymous Coward, Nov 26th, 2008 @ 7:03am

    "making the software totally free and trying to sell support and hardware. This clearly diminishes the value of the products and doesn't offer a mechanism that encourages people to pay for software."

    I'm... confused. If you're selling hardware and service, why would you care that it doesn't encourage people to pay for software? You aren't selling software. How is this a sensibly remark?

     

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    PaulT (profile), Nov 26th, 2008 @ 7:04am

    Indeed. SCO were an "open source" company, until they decided that suing IBM would be more beneficial than making their Linux products more attractive than their failing UNIX products. That fiasco's only strengthened the view of open source. The near collapse of Mandriva/Mandrake didn't make people think that Red Hat wouldn't be viable just because they offered a superficially similar product, and so on...

    I'd be interested in finding out why Rosenberg apparently thinks this direction is doomed to failure, even though similar (to varying degrees) changes seem to have worked OK for IBM, Red Hat, etc.

     

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    Anonymous Coward, Nov 26th, 2008 @ 7:32am

    Re:

    Who said anything about having a developer work for free? Like anything else, when you start out you have to have some investment capital. You have to get money from people, who expect to make some money in the long run.

    You damn well pay the developer. All this changes is how your company is going to make money. You concentrate on the harder things, such as quality support.

     

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    Steve R. (profile), Nov 26th, 2008 @ 7:33am

    The Software Developer is not Working for Free

    The company is deriving revenue from selling hardware and support. Some of that money goes to the software developer. What the software developer is doing is enhancing the value of the hardware and the ability of the company to provide service to its customers.
    -------------------------
    With start-up companies, of course you have to develop the software for "free". Customers won't give you money in advance of the product. Actually, a lot of start-ups go to venture capital firms to get funding so they aren't really doing product (software) development for "free" anyway.

     

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    Mark K (profile), Nov 26th, 2008 @ 7:37am

    Re: Re:

    Investment Capital.. Of course. It seems so obvious now.

     

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    Grant W., Nov 26th, 2008 @ 8:07am

    Making the same investment

    The staffing company I work for is currently making an investment in IGEL thin-client terminals for exactly these reasons: Their management software is free and requires no per-unit licensing, which dramatically increases the value of their terminals to us over the competing products we looked at.

     

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    byron88, Nov 26th, 2008 @ 8:09am

    Misaligned incentives

    An economist might point out that giving away software and charging for hardware and support of that software is 180 degress of misaligned incentives. The incentive here for Sun would be to write software that is inefficient and requires bigger/more expensive hardware, thereby driving hardware sales, and to write software that requires more and more support, thereby driving support sales.

    Granted, for the world to adopt your software, you have to write efficient software that is easy to maintain and use, both of which will kill your hardware and support sales. So, using the "don't have to swim faster than the shark" metaphor, all they have to do is write software that is just a little more efficient and a little easier to maintain than the other guy...sure they get reduced hardware/support sales each time a new and brighter generation comes out, but they live a lingering, diminishing, atrophying, morphine craving death for years to come.

    Cheers!

     

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    Adam Fisk, Nov 26th, 2008 @ 8:13am

    open source is a myth, software should cost money, VC business is nuts

    Those are pretty much the 3 points I want to make:

    1) Open source is a myth. Linux is essentially built by IBM, and don't let anyone tell you different. I'd like to believe at least as much as the next guy or gal there's this amazing open source army out there teaming together to get it done. The reality is far different. Don't take this the wrong way. It doesn't mean open source sucks -- I love open source, have managed open source projects with millions of users, and I open source every line of code I write (a lot of lines).

    2) Software should cost money. Anyone reading the papers lately? These companies built on infusions of millions of dollars of investment capital are a friggin joke. What ever happened to good old fashion profits and losses? Turns out nothing. Sure, if you've got millions to spare, you can gamble it all on Facebook or whatever, but if the fundamentals of the business suck, you've got the same old problem. I actually don't put Twitter in this category. Why? Their costs are low low low in comparison. All the other names likely popping up in your mind are a joke to me.

    That's why software should cost money. If you're doing something valuable, you should charge for it and actually run a profitable company. Sure, there's the whole "loss leader" thing in Sun's case, but why not charge for what you can? It also adds legitimacy. Sun seems desperate, further diluting their brand. It's like they don't respect themselves enough to charge for the software they're writing. That pretty much covers both #2 and #3.

    -Adam

     

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    Mike (profile), Nov 26th, 2008 @ 8:30am

    Re: open source is a myth, software should cost money, VC business is nuts

    1) Open source is a myth. Linux is essentially built by IBM, and don't let anyone tell you different. I'd like to believe at least as much as the next guy or gal there's this amazing open source army out there teaming together to get it done. The reality is far different. Don't take this the wrong way. It doesn't mean open source sucks -- I love open source, have managed open source projects with millions of users, and I open source every line of code I write (a lot of lines).

    First of all, even if we grant the premise that Linux was created by IBM (which isn't true...), how does that change things. If anything that makes the case for giving away software and charging for other things even STRONGER. Based on your own reasoning, IBM is spending its own money and resources to develop software that is given away totally free, and is doing just fine profiting from that.

    That SUPPORTS the idea of giving away software for free. Not the other way around.

    2) Software should cost money. Anyone reading the papers lately? These companies built on infusions of millions of dollars of investment capital are a friggin joke. What ever happened to good old fashion profits and losses? Turns out nothing. Sure, if you've got millions to spare, you can gamble it all on Facebook or whatever, but if the fundamentals of the business suck, you've got the same old problem. I actually don't put Twitter in this category. Why? Their costs are low low low in comparison. All the other names likely popping up in your mind are a joke to me.

    I would suggest that learning a little economics might help here. Again, you seem to be missing the point that IBM, for example, is making a ton of money by giving away software for free.

    You seem confused. No one said that you don't make any money. We said you make money from a different part of the business.

    That's why software should cost money. If you're doing something valuable, you should charge for it and actually run a profitable company. Sure, there's the whole "loss leader" thing in Sun's case, but why not charge for what you can? It also adds legitimacy. Sun seems desperate, further diluting their brand. It's like they don't respect themselves enough to charge for the software they're writing. That pretty much covers both #2 and #3.

    Value does not equal price. You value air, but you don't pay for it. Price is determined by the intersection of supply and demand, and if supply is infinite, then price gets driven down to zero. That's just basic economics. That doesn't mean it's not valuable, and it doesn't mean you can't make money off of it, but you make money off of having that infinite good make something scarce more valuable: in IBM's case, that's its services.

    I thought I wrote all of this in the post, so I'm not sure why you seem to be reiterating these obviously false points that you want to make.

     

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    gopi, Nov 26th, 2008 @ 8:33am

    support for free resources

    It is not like that ........ free resources must be made available for normal home users and companies must be forced to use paid resources !

    www.iwebforums.org

     

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    Rich Kulawiec, Nov 26th, 2008 @ 8:49am

    Re: Misaligned incentives

    But these incentives don't exist in a vacuum. Plenty of other people are writing software for Sun's hardware, from applications to operating systems (e.g., various flavors of Linux and BSD distributions, plus all the open Solaris variants). This means that should Sun pursue the strategy you outline, they'd quickly be outflanked by competing software. Even worse, they'd be outflanked by competing, open-source, portable, standards-based software that could be quickly retargeted to other hardware.

     

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    Adam Fisk, Nov 26th, 2008 @ 8:50am

    Re: Re: open source is a myth, software should cost money, VC business is nuts

    First of all, even if we grant the premise that Linux was created by IBM (which isn't true...),
    Ever talked to anyone who actually works on Linux? Ever looked at who is actually doing it full time? Company employees. That's fine. It's just a reality most people don't know.
    how does that change things. If anything that makes the case for giving away software and charging for other things even STRONGER. Based on your own reasoning, IBM is spending its own money and resources to develop software that is given away totally free, and is doing just fine profiting from that. That SUPPORTS the idea of giving away software for free. Not the other way around.
    Depends how you look at it. IBM latched on to an already extremely healthy open source project that had momentum and community. They (along with Red Had, Novell, etc etc) made it stand up against enterprise offerings, but most of the risk had already been take. Sun's approach is the other way around -- trying to create an open source community from a corporate code base.
    I would suggest that learning a little economics might help here. Again, you seem to be missing the point that IBM, for example, is making a ton of money by giving away software for free. You seem confused. No one said that you don't make any money. We said you make money from a different part of the business.
    Gee, thanks for the tip pal. I'll get on that. Arrogance is always flattering. My larger point is there's this dominant idea floating around that you shouldn't charge for software, and that you should build businesses based on users. I understand Sun's strategy of giving away the friggin software to sell the hardware. The problem is, the vast majority of their customers just want the best product available. They're not saying "sweet Sun's giving us Solaris for free!" they're asking "what is the best product in the market."
    I thought I wrote all of this in the post, so I'm not sure why you seem to be reiterating these obviously false points that you want to make.
    Oh, I'll re-read it. Oh no wait, I just disagree with you buddy. Are you serious?

     

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    Douglas Gresham, Nov 26th, 2008 @ 8:56am

    Re: open source is a myth, software should cost money, VC business is nuts

    I am highly amused by this. 1) has already been rebuffed pretty comprehensively, but I'll add to 2), because it's such a convoluted mess of different ideas and serious confusion. You can't call Facebook and Twitter different, model-wise - they, like the myriad of other web companies out there at the moment, both sell the service rather than the software. Some companies doing this aren't profitable, but the fact there are plenty that make money shows the SaaS model is viable and hence you don't have to charge for software.

     

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    Rich Kulawiec, Nov 26th, 2008 @ 9:00am

    There's a reason Sun's left standing

    Having worked in the 'nix area for thirty years, I've watched every vendor in the space come and go. The reason Sun is still with us, while DEC and SGI and dozens of others are dead, and HPUX and AIX are fading into irrelevancy, and so on, is that they've figured out how to cooperate with the community rather than compete with it. Look at their handling of ZFS, for instance -- they could have decided to treat it like a rare crown jewel, lock it up tightly, overcharge for it...but they didn't. Instead, they're actively promoting it in the community, making it available and providing resources to spur its adoption.
    This is a win for Sun (because some people will buy support and/or other Sun products) and a win for the community (because it's a very nice piece of technology).

    I'm sure this baffles some traditional business analysts, but then again, Unix baffled some of those same people decades ago. Some people have a difficult time grasping change.

     

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    Adam Fisk, Nov 26th, 2008 @ 9:04am

    Re: Re: open source is a myth, software should cost money, VC business is nuts


    You can't call Facebook and Twitter different, model-wise -


    I never said they were different model wise. I said they were different cost wise. That's a pretty key factor in running a profitable company.


    they, like the myriad of other web companies out there at the moment, both sell the service rather than the software. Some companies doing this aren't profitable, but the fact there are plenty that make money shows the SaaS model is viable and hence you don't have to charge for software.


    Except that the SaaS model says nothing about whether or not you sell it. It just says it's a service.

    I'll admit I'm lumping together selling software with selling services on web sites, but the two are very closely related.

    Good god, what have I gotten myself into? Back to writing SaaS so I can make some money...

     

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    Phillip, Nov 26th, 2008 @ 9:21am

    If that's me you're mentioning...

    My name has 2 Ls :(

    Anyway, nice commentary!

     

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    Tony, Nov 26th, 2008 @ 9:30am

    Quick!!!!

    Somebody tell Red Hat that they are failing and placing an undue burden on the open-source movement!!

    Wait...WHAT?????

     

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    Rich Kulawiec, Nov 26th, 2008 @ 9:45am

    Re: open source is a myth, software should cost money, VC business is nuts

    I see that old, thorough-discredited talking points are still not dead, happily regurgitated ad nauseum by those who fail to understand the irony of spouting them on a network which not only represents the largest and most successful engineering project in human history, but which is entirely built on open standards and open source software.

    It seems those individuals who cannot conceive of valuing anything in other than monetary terms simply lack the vision to perceive the larger picture -- and must resort to forcibly coercing a true world view into something much smaller and thus perceptible through their small lens. But this is hardly anything new -- we've been hearing this same tripe since we began building this network decades ago. My suggestion to them remains the same now as it was then: build your own network. Feel free to use proprietary standards and commercial software. Let us know how that works out for you.

     

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    Adam Fisk, Nov 26th, 2008 @ 9:53am

    Re: Re: open source is a myth, software should cost money, VC business is nuts

    @Rich Kulawiec I *think* you're referring to me? My entire business is built on open source and open protocols. I'm one of the people building the network you're talking about, and I'm a huge advocate of open standards, have helped the process along many times in MMUSIC and BEHAVE working groups at the IETF and elsewhere, etc. There are just a lot of illusions surrounding what's happening, and I think our discussion should be grounded in reality.

    Again, it's not some big diss to Linux to say it's largely built by paid employees. We should be more interested in what makes these various models succeed than we are in whether or not they match our conceptions of them.

    -Adam

     

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    Andrew D. Todd, Nov 26th, 2008 @ 10:45am

    You Don't Have to be a Corporation, Either.

    There is a tendency to force the corporation form on to activities it doesn't fit, especially when there's a lot of Venture Capital/IPO mad money flowing. For example, if you want to cooperate, and give things away, that is what Foundations do. The YMCA, the Shriners, people like that. Similarly there was that debate between John Mackey of Whole Foods, and T.J. Rodgers of Cypress Semiconductor. Reading Mackay's stated objectives, my impression was that what he wanted to do was essentially a traditional "Rochedale Cooperative Store," so why not organize Whole Foods legally as one?

    http://www.reason.com/news/show/32239.html

    Sun Microsystems is not a hard-core manufacturer, in the sense that Intel and Seagate are. A working definition of a hard-core electronics manufacturer is that it runs Clean Rooms, and that its profitability is dependent on defect rates at nanometer-scale.

    I think that in the long term, virtually all large-scale open-source software will be shifted to foundations, which will get their funding from hard-core manufacturers like Intel and Seagate. Standards work is traditionally run by foundations and professional societies. In software, open source largely supersedes standards, because, instead of implementing the standard, you generally modify, or incorporate, or link to the source code, and do so under version control. I have my doubts about whether some of the present standards bodies, notably the IEEE, ANSI, and ISO, can make the transition, as they seem fundamentally hostile to open source.

     

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    CVPunk, Nov 26th, 2008 @ 11:00am

    some more myths for you...

    Here are some more myths for you Adam.
    Might wanna take a look.
    http://www.linuxplanet.com/linuxplanet/reports/6597/1/

     

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    Anonymous Coward, Nov 26th, 2008 @ 11:07am

    This sounds like it could work ... up until I remember how quickly we're jettisoning Sun hardware. At that point, I guess it's just down to people who want to wear Solaris T-shirts and are willing to pay for install discs signed by the developers.

     

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    Rich Kulawiec, Nov 26th, 2008 @ 11:13am

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    Whether Linux is being built primarily by paid employees or not is unimportant. Linux itself is not particularly important in the overall discussion of open source software, other than as one example among many. Other software packages (e.g., sendmail) have been around much longer and have had a far greater impact, both in terms of supporting Internet operations and in terms of demonstrating viable models for open-source software development.

    Moreover, it is a serious (but certainly not uncommon) error to consider the value of any package of software only in monetary terms. Take, for example, BIND, which is both (a) very valuable and (b) free simultaneously. It is such an integral part of the fabric of the 'net that most people don't even know that it exists or what it does. And while there have been a few competing software packages brought forth from time to time, it's still -- by a huge margin -- not only the most popular, but the standard by which all others are judged. So what's it worth, in financial terms, really?

    Everything.

    And nothing.

    The aberration of closed-source and commercial software is now coming to an end, as the computing industry matures away from it. It's coming with a recognition that the dilemma above isn't choosing between the answers: it's recognizing that the wrong question is being asked.

     

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    DanC, Nov 26th, 2008 @ 11:20am

    Re: open source is a myth, software should cost money, VC business is nuts

    Open source is a myth. Linux is essentially built by IBM, and don't let anyone tell you different.

    There is a distinct difference between corporations contributing to Linux (which, despite your claim involves more companies than just IBM) and claiming that a single company is responsible for the entire OS.

    That's why software should cost money. If you're doing something valuable, you should charge for it and actually run a profitable company.

    The problem with your argument is that you don't "do" software - development, support, and other services are the scarce resources, not the actual finished product. And none of those things dictate that the end product should be charged for. Charging for the services and giving the software away makes perfect sense if the chosen business model is sound.

    Sure, there's the whole "loss leader" thing in Sun's case, but why not charge for what you can?

    So the logic behind your argument is that just because you can do business a certain way, then you should do business that way? It seems to me that a more sensible solution would be to investigate what model makes the most business sense, rather than what happens to be easiest.

     

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    Adam Fisk, Nov 26th, 2008 @ 11:24am

    Re: some more myths for you...

    @CVPunk Just to reiterate: I build free software that's also open source; I do think, however, that more companies should charge for software because I think:

    1) More people will pay for it than you think
    2) As a result of #1, many businesses that are currently unsustainable could be made sustainable

    I'm really not attacking Linux or open source here. I actually think part of the problem is open source is associated with free. Myth #1 you point to is interesting:

    1) If software costs nothing, it's no good

    You don't have to convince me of that. There's also no shame in putting a price tag on something, though. There's a sort of badge of honor associated with making your open source software also free, and I think it's often a mistake if you want to make that software ultimately succeed.

     

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    FinanceGrad, Nov 26th, 2008 @ 11:24am

    Re: Re: open source is a myth, software should cost money, VC business is nuts

    Mike, I am inclined to agree with you on much of the rationale behind new business models, but I think that you are over-simplifying the economics of supply. You are asserting that the supply-demand 'intersection' of an infinite good must mean that the supplier MUST sell at zero. That is not true. The supply curve is not a result of the demand curve. It reflects the 'willingness' of suppliers to produce goods at a certain price. In some cases with software, that may, indeed, be fine if they are willing to do it and make money off of another revenue stream. But, many software developers will not do that because they don't have to...the quality of their ONGOING improvements of a product (including maintenance and upgrades) is good enough to warrant a price above zero plus they have capitalization that allows it.

    So, if some of the high-quality suppliers are not willing to do this and the quality or intrinsic value of their product is enough to differentiate it (think music here), they might be able to charge money for the product (even if its supply is infinite) and get away with it...but, the argument is not that they SHOULD, but that they might HAVE TO because they cannot control unauthorized distribution. Keep in mind that just because a product can be distributed like that doesn't mean that its fair game to do so.

    If that is what you mean by your argument, then I might be inclined to agree with you. But, keep in mind, that companies who charge for software often bundle the support in with the price so, effectively, its no different than giving the product away for free and charging for support only. You would never, ever see McDonalds just giving away beverages in hopes that some of its customers buy a hamburger. (and in this case, the beverage is so cheap that it almost qualifies as the same thing as an infinite good from their perspective).

     

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    Adam Fisk, Nov 26th, 2008 @ 11:50am

    Re: Re: open source is a myth, software should cost money, VC business is nuts

    @DanC
    There is a distinct difference between corporations contributing to Linux (which, despite your claim involves more companies than just IBM) and claiming that a single company is responsible for the entire OS.
    No question I'm overstating my case to make a point. There are lots of companies that make Linux, with IBM being the biggest. The reality is Linux is essentially a cooperative project where many large companies share the cost and mitigate their risk.
    The problem with your argument is that you don't "do" software - development, support, and other services are the scarce resources, not the actual finished product. And none of those things dictate that the end product should be charged for. Charging for the services and giving the software away makes perfect sense if the chosen business model is sound.
    Depends on the software. You're point is true for IBM and Linux, for example, and not true for Microsoft Office.
    So the logic behind your argument is that just because you can do business a certain way, then you should do business that way? It seems to me that a more sensible solution would be to investigate what model makes the most business sense, rather than what happens to be easiest.
    The logic behind my argument is that you should bring in cash where you can, and I think more companies could bring in cash on the software side. The free software stuff is trendy, but to me often misguided because fewer and fewer companies can afford to hemorrhage cash. @FinanceGrad made that argument far more eloquently than me however!

     

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    DanC, Nov 26th, 2008 @ 12:57pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    Depends on the software. You're point is true for IBM and Linux, for example, and not true for Microsoft Office.

    My point is true for any software - the scarcities may be different, but they exist.

    The logic behind my argument is that you should bring in cash where you can, and I think more companies could bring in cash on the software side.

    If it really wanted to, Google could put their search engine behind a pay wall and charge users for search results. But that would be a disastrous decision for the company, because their market share would plummet. Instead, they provide the search service for free and sell advertising space.

    Now granted, not every company is Google, but a philosophy of "bringing in cash where you can" can lead to incredibly short-sighted business decisions that ultimately have a negative impact on your bottom line. That's one of the reasons the music industry has been struggling with the digital transition for the better part of a decade.

    The free software stuff is trendy, but to me often misguided because fewer and fewer companies can afford to hemorrhage cash.

    If the company is hemorrhaging cash, then they have obviously chosen a poor business model, regardless of whether they're leveraging free software or not.

     

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    Eclecticdave (profile), Nov 26th, 2008 @ 2:09pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    > badge of honor associated with making your open source software also free

    It's got nothing to do with a "badge of honor" it's the simple economics of open source.

    Anyone is welcome to sell open source software for as much money as they can get - no open source license will prevent them from doing so. However since the same license gives all their customers the right to give copies away, one quickly finds the customer base rapidly vanishes.

    Would you buy a product from a market stall if you can plainly see the guy on the next stall is giving away the exact same product?

     

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  33.  
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    nasch, Nov 26th, 2008 @ 4:42pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    The problem is, the vast majority of their customers just want the best product available. They're not saying "sweet Sun's giving us Solaris for free!" they're asking "what is the best product in the market."

    So Sun needs to have the best product on the market. That doesn't mean they need to charge for it.

     

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  34.  
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    nasch, Nov 26th, 2008 @ 4:47pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    The point is not that suppliers aren't allowed to sell at non-zero prices. The point is that over time (maybe a long time), others will release free software that does the same thing, and it will become harder and harder to charge money (or at least very much money) for just software.

    As for McD's, of course the analogy is flawed. Why are there always analogies drawn between infinite and scare goods? McD's doesn't give away drinks, so Sun shouldn't give away software? Drinks and software aren't the same, so it doesn't make sense.

     

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  35.  
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    Rich Kulawiec, Nov 26th, 2008 @ 5:11pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    "The free software stuff is trendy [...]".

    Yes, I'm sure to many newbies who are unacquainted with the history of this network, it looks that way. However, given that the entire Internet is built on open source software and that it's now many decades old, I think it's fair to ask how many more decades it will have to persist before the diminutive "trendy" will no longer apply?

     

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  36.  
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    Lawrence D'Oliveiro, Nov 26th, 2008 @ 7:30pm

    Re: Misaligned incentives--Guess Who?

    byron88 wrote:

    ...giving away software and charging for hardware and support of that software is 180 degress of misaligned incentives. The incentive here ... would be to write software that is inefficient and requires bigger/more expensive hardware, thereby driving hardware sales, and to write software that requires more and more support, thereby driving support sales.

    Funnily enough, there is a large software company whose products seem to fit in with your claim quite well--they write software that is inefficient and requires bigger/more expensive hardware, thereby driving, or at least attempting to drive, hardware sales, and their software also requires more and more support, thereby driving a whole support industry.

    Who am I talking about? Microsoft, whose Windows operating system, in particular, represents some of the most bloated, cumbersome, inflexible and maintenance-intensive code on this Earth. Completely the opposite of Free Software alternatives like Linux, which are easy to install and keep up-to-date, adaptable to configurations from the very large to the very small, and run particularly well on modest hardware like the new, fast-growing netbook/budget-mininotebook market.

    Who's the one with the misaligned incentives again?

     

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  37.  
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    Filip, Nov 27th, 2008 @ 6:35am

    I must say

    that I agree with Adam, lately. Free part of opensource is a dead end for companies. Support alone just doesn't scale too well. And HUGE problem is in people's nature; most of the people are natural born free riders. They'll pay for something they must pay, but if something can be free, fck greater good and splitting costs, I'll enjoy my free ride!

    Of course, there are other ways of making money out of open source, but, it most likely that 99 % of REALLY FOOS companies won't be profitable, ever. Hence dual licensing, badgeware and stuff.

    Personally, I think that money in OS comes at the end of the circle, when basically one sells out its installed base to a company that can, or better yet, thinks it can, leverage that asset.

     

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  38.  
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    UtilitySoftwareHopeful, Nov 27th, 2008 @ 10:30am

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    Mike.

    First, I am not sure you have replied to FinanceGrad's comment. I would be interested to see your response.

    Second, I have read (and in many cases agreed with) many of your blogs over the years. But now I have a specific real world example which I would be VERY interested to get your thoughts on in the light of this conversation thread. All specifics have been removed as I want to focus on the principle around making money from simple unique software.

    I have a cool piece of utility software for use on the new generation of mobile smartphones (IPhones, Android, etc.). It will be extremely simple to use by design (therefore not requiring any support) but I believe is unique due to having a number of inventive steps (at least initially until someone copies the idea).

    My plan is to protect the idea through the use of a patent and then sell it for a small fee (a few dollars at a time). I will also offer ongoing enhancements for an even smaller fee. Of course, I am prepared to take the risk that no one values or is prepared to buy my product.

    If I am not able to sell the item for a fee (due to it being an infinite good) I have difficulty in seeing any incentive for me in investing my time and money in to developing this software. The nature of my product means that I can't make money from supporting it given its ease of use and I have not been able to think of any other mechanisms for selling a commercially significant scarce good on the back of it. In my opinion the world would lose one potentially very useful application.

    I imagine this would be a problem for many small software makers. I would welcome your thoughts. Have I:

    (a) misinterpreted your writings (It seems this is a common occurrence) or
    (b) is there another reason other then money why I should invest my own time or money to make this application or
    (c) am I missing some other ways to monetize this type of simple but unique software application other then direct sale and support?

    Thank you in advance

     

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  39.  
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    Mike (profile), Nov 27th, 2008 @ 6:44pm

    Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    So, if some of the high-quality suppliers are not willing to do this and the quality or intrinsic value of their product is enough to differentiate it (think music here), they might be able to charge money for the product (even if its supply is infinite) and get away with it...but, the argument is not that they SHOULD, but that they might HAVE TO because they cannot control unauthorized distribution. Keep in mind that just because a product can be distributed like that doesn't mean that its fair game to do so.

    Two points on this. Yes, I agree the issue is that they may *have* to give away the software for nothing, due to the competitive nature of the market (and note, that I include piracy as a natural part of this market). But, the more important point is that I think that giving away the software will almost always open up opportunities to make more money.

     

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  40.  
    icon
    Mike (profile), Nov 27th, 2008 @ 6:48pm

    Re: Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    But now I have a specific real world example which I would be VERY interested to get your thoughts on in the light of this conversation thread. All specifics have been removed as I want to focus on the principle around making money from simple unique software.

    Hey, it's really difficult to suggest a business model without knowing the specifics. Every market is different, and understanding the specific infinite goods and scarcities in a particular market would make a big difference.

    I don't know that you've misinterpreted my writings at all, but I would caution you that "support" is not the only scarcity in software, though you seem to indicate that's the only scarcity you're thinking about. I'd look carefully at other scarcities that are made more valuable by your software.

     

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  41.  
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    Anonymous Coward, Nov 28th, 2008 @ 9:54am

    Re: Re: Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    There are numerous large, medium and small companies whose sole purpose it to create and vend application software. They do not manufacture hardware, provide support services, etc. Adobe, Corel, AutoCad, etc., etc. quickly come to mind.

    It is very difficult to envision business models for companies like these that provide very important and useful products that are here characterized as infinite goods when these companies are not also involved in the provision of scarce goods.

     

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  42.  
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    Mike (profile), Nov 30th, 2008 @ 11:38am

    Re: Re: Re: Re: Re: Re: open source is a myth, software should cost money, VC business is nuts


    It is very difficult to envision business models for companies like these that provide very important and useful products that are here characterized as infinite goods when these companies are not also involved in the provision of scarce goods.


    You are thinking too narrowly.

    That's like saying it's impossible to think of a business model for horse carriage makers as the automobile came around. Yes, that's true, if they don't change. But, if they were willing to change...

     

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  43.  
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    Adam Fisk, Dec 1st, 2008 @ 9:31am

    Re: Re: Re: Re: open source is a myth, software should cost money, VC business is nuts

    @ Rich Kulawiec I'm talking about free as in beer. You've repeatedly misinterpreted my comments, and don't call me a newbie. I'd honestly be shocked if you know more about this topic than I do or have more experience in this field than I do.

     

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  44.  
    identicon
    Anonymous Coward, Dec 2nd, 2008 @ 1:03am

    Re: Re: Misaligned incentives--Guess Who?

    I was wondering just how long it would take for the Apple and *NIX fan-boys to crawl out of the woodwork...

     

    reply to this | link to this | view in thread ]

  45.  
    identicon
    Mike H, Jan 14th, 2009 @ 4:04am

    Re: Making the same investment

    The value of the terminals are overrated, they break down in a surprisingly fast rate, some terminals don't even last one year. Prepare yourself to stock up on spares.

     

    reply to this | link to this | view in thread ]


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