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How Can Companies Profit While Giving Code Away?
An anonymous reader writes "In an almost philosophical essay replete with references to everyone from Larry Lessig and Tim Bray to to Professor Yochai Benkler, Sun Micrososystems evangelist Simon Phipps explores the metaphor of subscription (well, of course it's not just a metaphor any more from Sun's point of view) as the way that companies will make money off of deploying open source solutions. His distinction between OS developer and OS deployer is useful, but the crux is his contention that, with a "system" such as Sun has put together like the JDS, 'You don't buy the software from Sun - instead you subscribe to the editorial outlook.' It's an alluring analogy - Sun as the editor-in-chief of a 'publication' (JDS) with readers who may or may not choose to subscribe. Worth reading."
But let's not forget newspapers make their money off the ads.
The code is free. The support is not.
Let's face it, most of us are scoffers. But moments before zero hour, it does not pay to take chances.
Then it is a support contract.
That's a different thing.
When you cancel a support contract, you lose the support, but you keep the code and get to use it.
When you cancel a software subsciption, you can't use the code anymore.
"Piter, too, is dead."
This model is very compelling for the commercial market -- companies know that they will both want customization and will need support for their software. They are willing to pay for expert assistance and 7x24 access to services. Enterprise software and support can sell for hundreds or thousands of dollars per seat - providing plenty of revenues to offset the labor costs of support can customization.
But the consumer market is very different. The consumer market has very low retail prices that can't support the high cost of labor - a $49.95 price point product can go from profit to loss on a single tech support call. This consumer market consists of two segments -- geeks who don't need support and the clueless who needs lots of expensive support. Currently, proprietary software makers can earn a profit, in aggregate, because they capture money from both the geek and clueless segments. They may lose money on the clueless, but that make up for it on the geeks who don't need support.
In a FOSS environment, the geeks can go for the free downloads and do-it-themselves when it comes to deployment, customization, and support of FOSS. Geeks have little reason to pay for FOSS-related services. This leaves only the labor-intensive clueless expecting to get a year of support for their $49.95. But because they are clueless, they will use more that $49.95 of support labor (even if that labor is in India).
The trick with these services models is finding people that are both willing to pay for service but that don't actually need to use the service that much. Its a very good model for corporate IT, but I don't see how the numbers can work on the consumer side. Perhaps someone in tech support has numbers for the statistical distribution of the percentages of people that use X-minutes of support.
Two wrongs don't make a right, but three lefts do.
How to make money on 'free' software.
Charge for support.
(You want me to tell you how to use the software, then pay me).
Charge to become a member of the stearing group. (you want development to go this way then pay me).
Charge for features, and non critical bug fixes. (you want that, then pay me)
I think support should be by Open FAQ's, you have to pay to get someone to look at your problem, but as soon as the solutions posted everyone can view it.
thank God the internet isn't a human right.
If you take a look at what Sun is currently charging for the Java Desktop, it just doesn't make financial sense at the current price point. I for one don't expect to see companies switching to a subscription model that charges $100 per system per year (granted the current pricing until December 2, 2004 is $50). To be competitive and offer the business community a truly compelling reason to switch to the Java Desktop, the price is going to need to come down just a bit more.
What might be a motivating factor for a company to purchase a product using the subscription model, support perhaps? Well they do give you 60 days of support but the remaining 305 days of the year support will cost extra.
-- Just my $0.02 worth...