:: MIS Insights ::

free software can be very profitable. it doesn’t matter whether it’s free legally or illegally. if we take a look at the business models that software has gone through, we can see that there’s no such thing as a free lunch.

BBS ~ Shareware and Freeware

in the golden age of Bulletin Board Systems, people used these systems to share files - most of which were freeware, shareware and drivers. eleven summers ago, i could still remember getting all the freeware and shareware games that i could lay my hands on. i could still remember the popular DOS games such as Commander Keen, Duke Nuke’m and yes, Doom 1!

For those that didn’t experience shareware and made the evolutionary leap towards Captain Hook’s software, shareware were fully working programs whose functions were limited to a certain extent. For instance, Doom 1 had three episodes. The shareware version only had the first episode. If you wanted the other two episodes, you could buy the full and registered version. As another example, some mp3 rippers wouldn’t allow you to rip faster than 2x from CDs or some picture viewers had a nasty text in the middle of the page “Please Register!” (hex-edit, anyone?)

Freeware is free. Fully functional programs that didn’t require royalties. Just a reminder once in a while how you could help the college student who wrote the program get by with his measly weekly allowance. What do these “college students” get out of writing free software? Nothing much but experience, exposure and a chance to start your own company.

Internet ~ Registered and Activated Programs

As the internet became more available, shareware as a product took on a different light. Shareware now became a service. For products that could use updating, the registration scheme was the profitable way to go. If you want updates to the your anti-virus, you’ll have to register to receive critical updates. Think Norton, Symantec or McAfee. Register and you’ll get X years worth of critical updates from our server.

Well, of course these programs were functional. They just weren’t as useful with old antivirus definition files. However, another program i know is pushing the envelope even further. Grisoft. They provide functional software and free updates without extra features that could enhance your sysad life. Of course, for those bells and whistles, you have to … register and pay up.

From a free simple AV software, such business tactic has allowed grisoft to come up with a rich and feature-packed software. What did they get by providing free software? Testing. Testing is one of the most important and expensive steps in a software’s development life cycle. Grisoft was able to skip this by letting the users use the program themselves - and there is no better testing method than that.

With the evolution of technology, particularly the internet, software once again took a different path. Several applications and operating systems needed activation for them to run properly and indefinitely.

*nix ~ Free and Open Source Software

Now, when there’s a fully capable software alternative, why would you bother with software that you have to pay for?

Well, for one, it’s because people don’t like to read manuals. People aren’t really paying for the updates, they are paying for that button in the software that says “Click Here to Get Updates.” Yeah, i know, FOSS also has those functional buttons that say “Click Here to Get Updates.” It wouldn’t be right to pit FOSS and Paid Software against each other by virtue of capabilities.

This brings us to the other point. The profitability of hardware is determined by paid software. Microsoft invests millions in R&D to make sure that their OSes and applications will work in every popular harware out there - wherein part of those R&D funding goes to the hardware manufacturer themselves too. People just wouldn’t buy an OS or application which won’t run on their hardware out of the box. While most people might be at home with tweaking their configuration files to make the hardware and software run, not everyone is.

So, if there’s *no* money involved in FOSS, why do people bother? Don’t FOSS developers need to earn and feed themselves? Actually, there is a lot of money in FOSS. Where Original OSes, Licensed DBMSs and Registered Applications on Production servers can easily cost thousands of dollars, such FOSS alternatives can cost but a fraction of it. This is where FOSS developers come in with their technical support fees. Many large companies are willing to pay a lot for developers and sysads who can make FOSS run because it will be cheaper for them in the long run.

The internet would grind to a halt if an anti-FOSS meteor hit the earth and exterminated all FOSS. Most web apps run with Linux, PHP, Python, Perl or Java - to name a few. Extinction of such technologies wouldn’t be a good proposition for many people concerned.

Captain Hook’s Software ~ Cracked and Downloads

Lastly, we come across the kind of software that you have to pay for to use, but you don’t pay for it and still use it. Yes, we’re talking about Captain Hook’s Software.

Most people might get away with using pirated software at their homes. Most of which are available for download using peer-to-peer file sharing networks. But what does this mean for software companies who lose a lot of money from these pirates? If people use cracked versions of their programs that don’t make them pay for it, what do software companies get?

Familiarity.

If people don’t know how to use any other kind of software besides the pirated version they have at home, business employers will most probably use the original version at the work place to save on time and tutorial expenses. In the end, these companies still get the $moolah$. In this world of high-speed internet that we are now living in, familiarity is a small price that software companies are learning to live with.

In Conclusion

I thought about this as i came across MMORPGs that were free to play but whose enjoyment level would only increase if you bought the premium items available in the real world. It’s a good business model and profitable one by theory and actual results.

Think about it as we venture deeper into Web2.0 where web apps are getting richer and more functional by the day. I’m sure you’ll find a way to earn a buck or two.

[this is not a glorification of any company or software, i did not receive anything for writing this ~ focus on the business model, please]