When a bus pulls out the bus stop, a person who’s running to catch this bus and the person who is already in the bus see things differently. On the same note, people who use the free software and people who develop it look at giving away the software for free differently. I had a chance to be in both camps…
Besides offering professional services, our company, Farata Systems, creates software components and plugins . When we’ve released our first component DAOFlex and saw a couple of thousand downloads, we’ve decided to invest our own money and created a number of productivity plugins that would save time of professional software developers. Unless you work for a large firm, there is a huge difference between creating an open source and commercial software. With open source components, availability of any product documentation is perceived as an extra bonus. With the for-profit software, a well written documentation is expected, or else…
In the open source software, having bugs is a norm of life, but if you charge for it, any Joe-Shmo who paid $19.95 for this software, expects to have quick bug fixes and an expert-level production support provided by an engineer who’s paid at least $30 per hour.
OK, you want to sell your software – how much? The answer depends on who are your customers. If you sell to lots of individual consumers, preferred price is $19.95 or less and it does not really matter how much money did you invest into producing this software. For many people, twenty dollars is some kind of a magic number, and if an item costs more, people just do not buy it. If you are selling software for enterprises, THE SAME software has to cost at least a couple of thousand bucks, come with a salesman in a blue suit and 24×7 production support, otherwise big guys won’t take you seriously and won’t purchase it.
There is this joke about filthy rich “new Russians”, when one guy meets another who wears a nice yellow silk tie by Armani.
The first one asks, “How much did you pay for it?”
“You are plain stupid. Two blocks from here there is a place that sells the same exact ties for $200 a piece! ”
The same principle works with enterprises – the higher the price, the easier to sell.
Getting back to our products… We’ve invested our own time and money and developed a number of productivity plugins that save tremendous amount of time to any professionals like ourselves who work on Adobe Flex and Java projects for a living. Most of our components are priced from $99 to $399 dollars a license. After selling a number of copies we broke even, our R&D expenses were covered, and since we mainly sell Flex consulting, we started to talk about either giving these components away for free or cutting the prices since these components are not our main source of income anyway. But after a quick discussion, we’ve decided not to do give them away for free for several reasons:
1. If we make them free, a lot more people may start asking for support, and we do not have a dedicated person to answer such requests. Rejecting these requests is not an option either because people will start badmouthing us in the Web.
2. Our target customers are professional developers who value their time. They could easily do the math and appreciate the savings that these couple of hundred dollars would bring them.
3. As of today, these components give our consultants an edge while working on the projects for our clients. Btw, our clients get these components (except ClearBI) for free. If we’d give them away for free, we’d lose this competitive edge. Want to have an edge too? Spend a couple of hundred bucks while other people enjoy free software.
4. Giving components away for free while selling support is not an option for us, because these components just work and do not need much support especially for those who found the time to read the fine manuals (a.k.a. RTFM) that come with the products.
Free software plus premium for services works for creators of JBoss, Hibernate, Spring, Ruby on Rails, and AJAX frameworks because all of the developers that use these packages benefit from having an expert in the respective product handy. Our components are automated and can be used as is.
In the USA, a minimal price is being enforced on some grocery products, and stores are not allowed to set the price lower. Why? To keep the small convenience stores running. Without this regulation large supermarkets would start selling milk at 20 cents a gallon. They’d lose money on milk, but it would not really matter because after entering the store, the customer would purchase lots of other products at a substantial markup. But such a low price on milk would have killed all small stores in the area.
On the same note, the big guys give away software for free. Sun Microsystems made Java and NetBeans free. Tibco has open-sourced GI, their AJAX tool. Eclipse IDE is an open source project (let’s pretend that we do not know that it has started with a $40M worth of code donated by IBM). The big guys are killing small independent software vendors, who understand that they won’t be able to compete with a price tag of 20 cents even if their “milk” will taste a little better.
So why do we even develop these components? Because we can, and it’s fun. Do these components help us in finding consulting jobs? Absolutely! Seasoned hiring managers understand that if we were capable of creating this software the chances are high that we’ll succeed in working on their projects as well. And to be completely honest, somewhere in the back of our minds there is this little thought that may be one day one of the big firms will decide to acquire our small company because of our products.
Sincerely as usual,