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Calculating the True Worth of Software
chromatic writes "Many people recognize that the cost to duplicate a piece of software is a fraction of the number on its price tag. Many people also understand that software without support and maintenance loses much of its value. Is there a way to put a price on the software, support, maintenance, and the option for future upgrades itself? Robert Lefkowitz recently applied an options pricing model to software in ONLamp.com's Calculating the True Price of Software. Don't let the description fool you; it's both a readable and serious apologia of the common free software business model."
...although simpler, I think. Apache 2 comes in at a half million dollars, Tomcat weighs in at $250K.
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How much should I charge for my software? http://www.joelonsoftware.com/articles/CamelsandRu bberDuckies.html
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You've just released your latest photo-organizing software. Through some mechanism which will be left as an exercise to the reader, you've managed to actually let people know about it. Maybe you have a popular blog or something. Maybe Walt Mossberg wrote a rave review in the Wall Street Journal.
One of the biggest questions you're going to be asking now is, "How much should I charge for my software?" When you ask the experts they don't seem to know. Pricing is a deep, dark mystery, they tell you. The biggest mistake software companies make is charging too little, so they don't get enough income, and they have to go out of business. An even bigger mistake, yes, even bigger than the biggest mistake, is
And this is an interesting point. I've always been amazed at the dollar figures the BSA gives out for the "value" of "pirated" software, avoiding the fact that a large percentage of these people would not have bought the legitimate copy anyway.
"Who are in control, they are not in control of anything - they don't even control themselves!" - Glen Beck
My contract rate as a QA Lead Tester is between $15 to $20 per hour. That's how much software is worth in Silicon Valley. However, outside of Silicon Valley, I would get $50 to $70 per hour for the same kind of work. Go figure.
You can't charge awefully more than your competition, can you ? If the competition gives it up for free -- then well, all your calculations go awry.
Think about the price of a browser, media player and well, a operating system.
Think Netscape vs IE circa 2000 AD. Now, only a free product could defeat IE.
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Sounds to me as if the way to make valuable open source products is to create a product that is very difficult to setup (thus producing much consulting/support revenue) but very powerful once you've got it going. If you can find something that requires extensive customization you're probably on the right track. Easy to configure products that are readily usable by everyone don't contribute usefully to the open source community's economic well-being (as they'll just be used by non programmers and won't fund any developers by way of support contracts)...Interesting... This suggests that the income proposition for opern source products is almost backwards from that for closed source. A closed source commercial company wants to provide the product pretty much ready to go and doesn't want to provide extensive after sales support. An open source company wants to release products that require extensive support as paid contract work (and this sort of product enriches the entire open source community...at least as long as the end result of the customization is quite valuable)...
avoiding the fact that a large percentage of these people would not have bought the legitimate copy anyway.
Yes, but there's a big difference between that legitimate copy and a legitimate copy. Would someone who pirates Adobe Photoshop with all bells and whistles buy it? Very unlikely. And they do, because if you're going to pirate it anyway, why go for anything but the most powerful and expensive program? But if he could not pirate any graphics program at all, he'd likely buy something. Maybe a lighter Adobe product, Paint Shop Pro, maybe he'd find GIMP or any number of possibilities. But it's not likely he'd stick with MS Paint.
So it is equally wrong to pretend that none of the piracy leads to lost sales. But finding the exact factor would involve some handwaving and a magic number between 0 and 1. Piracy apologists often claims it is 0. BSA claims it is 1. Both are wrong and they know it, but it fits their agenda and it is difficult to say what the factor *really* should be. Good luck in trying.
Kjella
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