The software industry had/has a lucrative, self-sustaining business model that was very much the same as every other business on the planet. I'm a part of that industry, so I do have a business model. IOW, I'm not the one trying to tell someone that they shouldn't charge for their efforts/products, so it seems to me that the onus on coming up with a workable model is on those that have been trying to institute the "everything is free" model for some time, not me.
As for your other comment: I believe there's a saying that covers this:
This right here, I believe, is the biggest problem facing software today. How do you pay for it? End-users expect software to cost $0, yet it takes a lot of time and effort to build anything.
The most successful software projects and companies I see today are those which figured out innovative business models: advertising, hardware, free for open source / paid for business, make it all open source and get a job maintaining it.
There's no one correct answer. For any business model you pick for your software today, half the world will be upset with you. I wish Mathematica was more affordable, but I can't fault someone for creating a sustainable business. As Joel Spolsky said, good software takes 10 years (at least!), and most software dies long before it gets 10 years of development, so we never even get the chance to see if it could have been good.
There's more startups charging consumers now than anytime I can remember. It used to be that unless your startup was retail based, it was free. Those days are gone.
* My IT guy $200 per hour. If maintaining a technology takes a day a month -- which is wildly optimistic -- that's $1600 per month
* The organization which developed the tool e.g. $50-$200 per month
* A random outsourcing organization $10-$50 per month
By making your software free software, I will still pay you, but I know that:
1. If you do decide to spike prices, I can go to the off-brand company or to my IT guy. You better provide better service than the off-brand at lower prices than my IT guy.
2. If you do go out of business, I can go to my IT guy.
It's all about power dynamics. You don't have the option to f- me, and by having taken away that option, you've made it more likely I'll buy from you. It's often just simple good business.
Oracle's business model is largely about buying up companies with large locked-in entrenched bases, spiking prices while lowering costs, and milking cash cows as the cows gradually die. They did that to Java and a few others. Free software means I can't get Oracled too badly.
Some companies take a middle ground by e.g using open APIs. For example, AWS has services which have better price/performance than free software, but maintain compatibility. I'll be more likely to use those than proprietary alternatives because if AWS decided to Oracle me, I can switch to the free software version. There are systems like git, where essential business value is free software, so I can move my code out and around if Microsoft decides to oracle me, but where there is a significant proprietary value-add.
Your value to customer goes up with:
100% free > hybrid models > proprietary
Your barriers to competitors go the other way.
This isn't just signaling. It's power dynamics. Companies send out false signals all the time. This is a hard barrier.
The right business model depends on your market and technology. I've mostly done free software, and that's mostly a matter of choice -- I've picked businesses where 100% free makes business sense.
> There's no middle ground between "here's your free font" and "pay me/us a lot of money".
This is a general problem in many businesses. Back in the early days of blogging, Joel Spolsky wrote an entire article about how there was basically no software that cost more than $1,000 and less than $75,000. This was more than a decade ago, the numbers today would be different because we care about LTV not sticker price, but the gap would still exist.[1]
Of course, heuristics like this are not strictly true, but the general shape of his argument is still correct: There are three kinds of monetization models for software: Free, cheap, and dear:
1. Free as in beer. Open source, etc.
2. Cheap. $10 – $1,000, sold to a very large number of people at a low price without a salesforce.
3. Dear. LTV of $75,000 – $1,000,000, sold to a handful of rich big companies using a team of slick salespeople that do six months of intense PowerPoint just to get one goddamn sale. The Oracle model.
Net result is that some products are sold to people to scratch their own itch, and some products are sold to businesses that can justify the ROI of spending a large amount of money, and between the two it is hard to find reasonable options.
We see this in all the products that start at a low price and solve a simple problem, like DropBox and 1Password. Then they pivot to "The Enterprise" and you are now talking subscriptions, seat licenses, and all sorts of fancy enterprise features to justify the price.
I used to see this in hotels when I travelled on business. When my clients were paying, they put me up in fairly luxurious hotels that charged me $3 for a room service coffee. When I was paying, I stayed in Motel6-type places that had free coffee in the room or at the end of the hall. I think everyone eventually offered free coffee in the room, but the last time i traveled there was a similar dynamic with WiFi: The naive would expect the cheapest accommodation to try to rent you internet access, but it was the other way around. "You have an expense account? Ha! Pay for WiFi!"
Same dynamic: If you are selling to business, you have to have the sales force, customer success organization, and features business want to buy (like back-end integration with business expense and planning systems). That all costs you money, which you recoup by charging an arm and a leg.
TL;DR: The moment you start selling to business, you are on a path to charging huge money for something that when sold to individuals, ought to be affordable.
Not everything has to have a business model. Some people write code because they want to, and then give it away for free. If you plant a seed in the earth, it will give you food for free, too.
Also, we’re starting to reach the point where money is an ineffective incentive.
This analogy works better if you are considering it as paying for software related consulting services rather than buying software "off the shelf". After all some of the worlds best programmers are working on software that is distributed for free.
Perhaps we can value software based on how much additional revenue it helps you generate or how much savings it generates through optimizations or automations.
My former company tried to do this. People balk at this. "Why should I pay when there's 'free?'"
> Paying all these engineers to write that code was expensive, and now you want to give it all away for free? Most companies never do that for anything, why would they make an exception?
I'm not saying it doesn't exist, but I've been doing professional software development for more than twenty years and have never encountered this. There's plenty of "we should be paid for our work and innovation" but nothing so reflexive as what you describe here.
Free for nonprofits/hobbyists and €500 as soon as you use a piece of software commercially would be very reasonable. But charging the same from someone who doesn’t make a penny as from a company making millions doesn’t make much sense.
I don't think just distributing it for free will net you revenue. Usually people need a reason to pay. I personally will pay for something if really want it, and I'm incredibly annoyed by the free alternative. Likewise, someone in a small team in a big company will use your software for free, but until they get annoyed enough by it, they won't convince their boss to pay for it to avoid the annoyance (or gain the premium feature, etc). In this sense, the value driving the purchase is the pain factor, not how useful the software is by itself.
You should also tailor your business model to the product's market. If you have a broad market - home users, small business, large businesses, etc - some can use it for free, but some will still pay. If it's a smaller market - only small businesses - maybe only a few will pay if it's available for free.
You can also change the business model to be free software that drives paying for something else - like a cool cli tool, but a much more useful premium GUI. Or a free tool that's easier to set up and use as a SaaS.
If I create software I am entitled to sell it. People are not entitled to get it for free if I want them to pay me for it. Yes, it costs me nothing if they pirate it. But can I steal a car from a factory if I pay them the marginal cost of producing it? Of course not.
Paying for content creation is a fantasy in software. Name any big consumer application that could have been developed that way with developers getting paid about the same as they would by selling it (i.e. about the same as the value they provide).
Doesn't that thinking discourage the creation of consumer software? Just because someone isn't making money off of my software doesn't make it ok for them to have it for free.
While your point that software development is not free is valid, it's more a matter of ethics, not economics here.
While the stuff parent comment had mentioned is legal, it's at least questionable, and is perfectly valid to complain about, and even call this extortion (given that the comment was about a mild case of gaming addiction).
When I'm reminded of this I'm somehow saddened by the fact users en masse seems to have very self-respect when it comes to such stuff (and/or lack choice), so voting by feet doesn't work.
While this is how it should be I find reality to be a lot different. The cultural shift required is so massive that I don’t think it will happen anytime soon, if at all. People have become accustomed to open source software. Critical infrastructure which is free. This is again drilled as a point, that software should be free, by the consumer software. Google and App Store have destroyed any resemblance of rationality in pricing software products. People expect stuff to be free (ads and stuff is fine, the really obnoxious people will block even those) or if not free, they expect a rock bottom price. People argue for software which costs 5 USD and some irrationally expect it to be cross platform, high polish and the dev should respond within minutes. Trying to sell software these days has become a harder argument especially if you are not able to quickly deflect these massive hoards of price-complainers.
This is the case for consumer software. I am not even trying to imagine how harsh it would be for an open source maintainer - who has absolutely no leverage given the source is already out there. What’s happening with docker, elasticsearch, Redis, MongoDB et al is not giving me hope either.
Paying for software virtually limits the supply, which is detrimental to many efforts. Software is not a consumable like beer, therefore the comparison doesn't work. Granted, development is not a one-time investment with virtually unlimited pay-out, either, if maintenance is involved, and has a half-time decay due to progress in technology - but precisely because of that, people would rather not pay than make a risky investment. Ultimately, it's hard to put a price tag on it, therefore we are better of getting people jump the band-wagon instead of declining the benefits of the technology that in case of doubt would seem overpriced.
And then there are the idealistic developers who don't need to get paid for that specific piece, because they did it out of need, not greed. The potential for abuse on that side is also apparent, that limits the free market.
So, two adjoint markets exist with some customer-transfer:
One for power-users that can estimate the value of the tool and are willing to pay and another for freeloaders. Freeloaders benefit from a quick decline of value in the upper market, while the upper market benefits from a growing, free market that is basically advertising if not educating for the upper market. Only nothing is ever really free, freebies come with a small or hidden price attached.
As for your other comment: I believe there's a saying that covers this:
https://en.wiktionary.org/wiki/if_my_aunt_had_balls,_she%27d...
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