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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."
"Many people recognize that the cost to duplicate a piece of software is a fraction of the number on its price tag."
Yea right! A good piece of software, say a game or an office suite or something takes R&D which costs money, the actual software development which costs money, testing and fixing bugs which costs money, writing documentation which costs money, producing the boxes/labels/CDs/etc which costs money, and advertising which costs money. Employees must be payed and until the software goes for sale, the companies have a lot of sacraficing money wise. Although a box, book, and CD don't cost much, if you sell your software for say $100, it still takes a LOT of software to be sold in order to cover the costs of the employees and their work. Sure, after awhile, for example with Windows XP and its 4 year age the cost to create it has been well covered, but for smaller companies its not just a matter of being a fraction of the cost to create it.