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."

Comments

The actual price of SW.

[alexhs]

Is there a way to put a price on the software, support, maintenance, and the option for future upgrades itself?

Easy, these prices are proportional to the penetration indice of your previous software : a monopoly charge high fees, an outsider small ones.

Koders does something like this...

[tcopeland]

...although simpler, I think. Apache 2 comes in at a half million dollars, Tomcat weighs in at $250K.

Worth or cost?

[mccalli]

Headline talks of worth, blurb speaks of cost. As I'm sure the poster is aware, they're not the same thing by a long way.

For example, I run a one-man contracting business. The worth to me of my accounts package is vast, the cost of it miniscule in comparison. And that cost is...one copy of Virtual PC for around £100 I think (I run OS X), one copy of XP for around £170 (retail, used it on a physical PC I no longer have and now it's on the emulator), then around £50 for Quicken UK. I can feel the Free people ganging up on me - I must be mad! That adds up to £230, that's nearly the price of a low-end machine! Well, to me that software is worth the amount, and the price is an utterly negligible amount of the cost of running my business.

Cheers,
Ian

Re:Worth or cost?

[xenocide2]

The whole article hinges on the financial and economic theory that cost (ie price) is an indicator of worth. The difference between the two is called consumer surplus, and in theory businesses attempt to "capture" that surplus by attempting to charge you more for it. In markets where we can't charge specific customers exactly what they're willing to pay, the price is simply the one that maximizes revenue. Not that there's any way to really know which price maximizes revenue.

Also, consider your alternative: hiring an outside accountant to handle your books. Surely he would cost less than the worth you're implying. And surely he costs more than 230 pounds plus the headaches of managing an emulator and finances by yourself.

I suspect that there's several things that you couldn't do your business without. The article's point is that they all come together, and you can't say that each one is equal in value to the revenue you make.

Of course, software generally does break one of the foundational rules of economics: scarcity. At least, on the margin, software is essentially not scarce. Or at least, not 30 percent margins like they earn. Copyright law drives the high margins on software. Whether this is good or bad seems to depend a great deal on whether you're an american or not. I suspect an even stronger indicator would be whether you own stock in MS or Oracle or IBM or not.

To me..

[riflemann]

The price of software is whatever value it adds to my business, or personally it's whatever I'm willing to pay for whatever convenience it offers (after all, software is 90% "convenience" for personal use)

If I were a doctor, a full medial records + billing application would be worth many thousands (or equivalent of support services for free software). If I am running a bakery, then inventory software is worth far less.

As a hobbyist, software related to my hobby would be worth more than some random game to play with once in a while - if I'm a gamer, that game is worth a lot more than the same hobbyist values it.

Re:To me..

[Rosco P. Coltrane]

I fool around with Adobe Premiere Pro sometimes (To be honest here--I did not buy it). I use it to produce fan videos for EVE Online, but thats about it. To me, it isn't worth much, nowhere near the 800 dollar price tag.

What a strange way of thinking. It's like saying "hey, I drive a Ferrari from time to time, but I really don't use it all that much, therefore it's not worth X million dollars, so I stole it".

Tell you what: in a normal world, if Adobe Premiere Pro isn't worth 800 to you, you don't buy it, and you certainly don't steal it. Period.

I too downloaded a couple of software I don't want to pay (AutoCAD, chiefly), because there was no good free alternative, but I don't find myself half-assed excuses. I stole them, that's all. I'm not saying it's right, or moral, but that's what I did. Can't you look facts in the eyes yourself?

Re:To me..

[bnenning]

Tell you what: in a normal world, if Adobe Premiere Pro isn't worth 800 to you, you don't buy it, and you certainly don't steal it. Period.

I'm disappointed at how many people here go along with the BSA/**AA line. Duplication is not theft. It may be illegal, and it may be wrong, but there is a clear difference.

Re:To me..

[Jasin Natael]

This raises an excellent point, which I had hoped (considering the title) would be explored in TFA. How much should one charge for software, especially for mission-critical applications? Is it equitable for a developer to charge a portion of the potential benefits? Should the developer set the price of sales based on the cost of initial development (and hence replacement)? Let's explore the issue.

Say I'm contracting for a company (with an option to resell the software later to other companies) who needs a program to assist management in analysing and managing all the facets of their business. The company stands to benefit from this software -- by changing some job descriptions, by managing laborers better, by scheduling operations more efficiently, shipping more product on time, etc. -- on the order of about US$500,000.00 per month.

On the other hand, the company will be required to purchase complimentary services -- Internet connectivity for its office and salespeople, internet plans for many employees' mobile phones, zipcode database subscriptions, etc. -- and complimentary software and will spend a significant number of employee hours bringing the new system into operation.

As an employee, the pricing is simple: write the software in the course of your job. As a contractor or software reseller, should I price the software at the cost of original creation, perhaps on an annual-salary basis? Support services will be offered later, as is expected in the software industry.

What we see is this: There is a huge disparity between the actual cost of producing the software (about 1 year's salary) and the amount one could expect to benefit from it in a reasonable period of time under a recovery model. Say, if the business wanted to recoup their investment in 6 months, they have an upper cap of about $3 million for the software. But, assuming they can find and hire a good developer, they could re-produce the software in about 1 year for less than $100,000.00. (Lost profits would be huge for that time, but we'll leave that out of the picture.)

Any guidance for a fair and ethical pricing model? Are there any accepted formulae for this?

Jasin Natael

Re:To me..

[adam872]

When talking about stuff like this, you get into the world of cost-plus versus value based pricing. The cost-plus pricing, as you alluded to, is based on the question: "how much does it cost me to engineer this widget, plus the cost of supporting it over time?". You calculate that cost and add markup to it to calculate the price you will charge. In a competitve market place, you will be under pressure to lower prices to win business, which eats into your margin. So you are then left with either reducing your engineering costs or accepting lower margins. That is, unless you are cheaper than your competition and then you get to preserve your margins.

The other way to do it is to work out how much value this widget creates for the customer. You ask yourself the question: "how much will this widget do one of: lower operational cost, increase productivity, enable new opportunities or reduce risk?". If the numbers are substantial, you charge a proportion of that value as your price (you better be able to demonstrate that, otherwise noone will buy it). In my experience, value based pricing is higher than cost-plus.

Which way you go depends on how much of a commodity your product is. For stuff that anyone can make, you have little chance of using the value based model, given a high rate of competition. For highly specialised areas, the opportunity is greater. However, most widgets become commodities in the end. Engineering practices become more efficient and the market widens for all but the most specialised of products (thereby increasing the volume but often lowering the price). You also have other players moving into the market and spotting an inefficiency they can exploit by being more efficient etc (Dell are the classic example of this).

The firm I work for wrestles with this choice daily. Our tools are very specialised and often create enormous value for the customer (last week, one tool saved the customer over USD 1M, but we charged a fraction of that and still made excellent money). At the same time, the market is competitve, preventing massive price hikes.

In terms of your question: I don't think there is an ethical paradox here. You simply decide which of the models you can use and charge accordingly. Assuming you are not in a monopoly situation, the free market will tell you if you are right or wrong with the pricing. I do, however, think that in a monopoly situation, the potential for market distortion and underhand dealings by suppliers becomes almost a certainty.

Price of Tetris

[SnappingTurtle]

Scene: me, in an arcade, 20 years ago

another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
another game: 25 cents
getting the high score: priceless

(or so I thought at the time)

Re:Price of Tetris

[Kjella]

Since you start with another game: 25 cents, I assume this is the abridged edition?

I keep hearing it...

[Kjella]

Many people also understand that software without support and maintenance loses much of its value.

...but I don't find it to be true. Apart from Internet applications that can be vunerable, I got lots of pieces of useful software on my machine, some are EOL'd. I'm still running win2k sp4, and unlike xp sp2 everything seems to work just as it did back when win2k was released. And my linux box has certainly never seen a support contract of any kind. My willingness to pay is ~0$, so it's not for lack of offers.

If I buy Photoshop today, it'll still be a kick-ass graphics tool in 5 years or 10 years. As long as the OS can keep up with hardware support (cameras and printers), is there any reason why I would need support and maintenance? Beyond public forums, that is? Now the "free upgrades" of most OSS apps are pleasant, but by no means necessary. There's simply not much point in sticking with an older version, but you could certainly do it.

I know things are very different in the corporate market, where a stoppage means major $$$ down the drain. But as far as I'm concerned, it's mostly a "I would pay if I had to, but support contracts I don't have to, so I don't" attitude to software. I think that's fairly common.

Kjella

Re:I keep hearing it...

[Anonymous Coward]

Many people also understand that software without support and maintenance loses much of its value.

Many people have also found out the hard way that
meaningful support is non-existent.
I have never, not even once, gotten the correct
solution to a problem with commercial s/w.

Generally, after some sweat, I've been able to create a work-around or discover the solution on
my own.

So, here's one place I can't say you get what you
pay for.

Re:I keep hearing it...

[wolf30082]

I think the corporate line would change if that same person polled were asked about their home machine. My informal poll of home users is that they wouldn't pay 20USD per month to have an assurance policy on their PC, where a technician comes around every month for an hour to check if they have the patches right on their box, and they get phone support for free. I cancelled the service after I had absolutely nobody embrace the idea, including the clients who spend 40 times that much having emergency calls made. With home users, it is more about a sense of, autonomy. The business IT exec who doesn't back up their stuff or have support for their software if a user discovers a bug, an unknown feature or what have you, is an unemployed IT exec. CYA is a way of life in the business world of my experience, except among many small businesses who act more like home users, and even think it is a slam against their competence that they will ever need any support services at all. I fix my own stuff, and so do not have service contracts on any of it. I do know where to look for information if I need it, though. This is not unusual among /.ers, I have noticed. I like open source because I can make changes lower in the source code (if I want) to more fully differentiate the stuff I work with, and there is not ever a question of infringement. The people I sell services to understand that the license of the software was free and they were paying for me to customize it. I can show a comparison of buying big box software, buying custom coding, and open source. The costs are comparable (if you include maintenance) for an implementation of Reddot or Mambo. They come in different times in the effective life of the software.

Sure there is...

[zr-rifle]

$699

Thanks,
Darl.

Cost vs value

[Anonymous Coward]

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?

Of course there is. Cost and value are two different concepts. Something can cost nothing, yet be very valuable (e.g. Apache).

Pricing things like support is merely the exercise of coming up with a price that is low enough to find people who value it more than the price, while still being higher than the cost to provide it.

The cost to provide support includes things like employing people who know all about the software.

The value to the customers is that they can rely on the software and get problems sorted more quickly without having to employ their own experts.

Neither of these bears any relation to the cost of the software itself. It can be free, or it can cost thousands, the principle is the same.

There is a difference between Free Software and proprietary software though; with Free Software, you can get support from a number of competing firms, and with proprietary software, you are limited to the original vendor. Free Software support has the advantages and disadvantages of capitalism, proprietary software support does not.

this just in:

[sum.zero]

value is subjective.

sum.zero

A Financial Analysis of Things We Already Know

[Akoman]

There is a lot of finance talk going on in this article, but the conclusion he comes to is one that many of us already know: commercial Open Source creates a market for support and maintenance. Article might be good for corporate types wondering why licenses cost nothing over here.

Worth of software...

[Nick Driver]

Software (actually the entire software and hardware combo as a functional system) is only really worth what it would save you in the time and money it would take to accomplish a particular job in another non-automated way. If doing that job in the manual, non-computerized way would cost you less, then you shouldn't involve computer automation at all. Every businessperson should really do a thorough cost analysis before allowing themselves to become addicted to any software app. Sometimes they'll find a system to be a tremendous time and cost saver, easily worth many times what the actual cost to implement the system and train the end users totals up to. Sometimes they'll find the system to be about as productive and cost beneficial as a heroin addiction.

Re:Worth of software...

[sillybilly]

Yeah, okay, the $5.99 solar-cell hand calculator that extracts enough cubic roots that would take me a day to do manually, is that worth a day's work? That's not a rule you should erect, why shouldn't something that's worth a lot to me, be of very low cost? Let's evaluate something, like oxygen, how much is that worth to you? In the free market something that is very abundant and easy to mass produce may get a very low price compared to what its true worth it, simply because the competitor suppliers are willing to produce it at that price. Especially when demand isn't that stellar. Of course there are always ways to mess with creating artificial demand, or make production artificially difficult. As far as software demand goes, it is important, but it's not a natural requirement to survive, unlike food, shelter and clothing. Soon it may be though - such as for now you're allowed to file your taxes with pen and paper, so you can survive even without owning a computer. As far as technology goes though, I don't think you can stop computers and technology being cheaper than people in the long run - think of human calculators, human telephone switchboard operators, and if everything goes right, soon human production line workers, janitors, etc. Just because bosses find people cheaper than technology these days, that doesn't mean there shouldn't be an effort to find a way where technology is cheaper than people. If you disagree, and you think we need even more jobs instead, and a way to keep everyone busy, then let's ban automated telephone switchboards, and hire the girls back to manually do the switching for us. Or if you don't like technology at all, you think it dehumanizes people, you're welcome to go out into nature, and make a living with your bare hands. No cars for you, no wheels, no plow, no bows and arrows. Picking up a rock and using it as a tool, well, we can debate about that whether it's technology or not. There is such a thing as too much technology though, if you cannot learn to control it - such as cellphones going off in the middle of a meeting, and the speaker telling everyone sorry, I HAVE TO pick up the phone because it's ringing. You don't have to, technology shouldn't be in charge of you, but the other way around.

Re:Worth of software...

[Nick Driver]

I was thinking more along the lines of something like this example, which is an actual business case that my employer went thru with a newly built civic arena in a nearby town.

The manager of this new municipal arena was at first, absolutely bent on buying a fancy computerized point-of-sale and inventory management system for all the concession stands. He thought it would cost about $20K, when the bids came in, the average price was more like around $70-90K for this system to be installed into all the concession booths plus a couple servers installed in the business office and all the network wiring & h/w to be installed into the building since they failed to include any datacomm wiring in the architechtural plans when the place was being built. Training the end-users on this new system would cost about $700 per person to attend the class. Annual software and hardware maintenance would be about $10K/yr for the first three years with the maintenance cost rising up to an estimated $12-15K/yr by the 5th year and the expectation to have to replace it all (e.g. a "forklift" upgrade) likely by the 6th or 7th year.

My employer's bean counters ended up pointing out that a bunch of relatively plain electronic cash registers for the points of sale, plus a regular Windows PC with Excel spreadsheets for inventory management would get the job done quite adequately for about $12K total purchase price. That's the solution that was put into place and three years later they're still using exactly that. Over that time, it has been proven that there has not been enough concession stand sales profits to really have paid for such an overkill networked P.O.S. system and all the ongoing maintenance and training that comes along with it. The low-tech cash registers and Excel spreadsheet are working just fine for a tiny fraction of the money. Plus, they've discovered that the turnover rate of sales clerks and concessions supervisors has been so high that they would've been training a continuous stream of new employees on a computerized system when the low tech business method requires little to no training to get new employees up to speed.

Harder to say

[SamShazaam]

As computers become more common it becomes harder to say. How much is a letter of the alphabet worth to you? How much is a common tool, such as a screwdriver, worth to you? Imagine if you could be denied the use of these though Intellectual Property laws.

Joel on Software on the same topic

[Psionicist]

How much should I charge for my software? http://www.joelonsoftware.com/articles/CamelsandRu bberDuckies.html

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 ...

Re:Joel on Software on the same topic

[MBCook]

Very little ($20?). That's my answer. Here is why.

People fall into three groups by and large. Here is what each will pay and why.

1. Mac People - They have iPhoto, or can buy iPhoto (as part of iLife) at a great value. That is an AMAZING piece of software. Good luck getting people to switch off it.
2. Windows People - They have Picasa. It's the closest thing on Windows to iPhoto. It's not as great, but is fantastic compared to everything else out there I've seen. It's made by Google and is FREE. Good luck getting people to buy your product.
3. Linux People - They want it free. Free OS, free software. Some will pay, but many will just use some OSS photo organizer and be happy with it because it's free. Not to start something, just my observations.

All that said I agree that pricing is a major mystery. Just a little too high and no one would touch it. A little too low and people will buy it, but as the blurb in the parent post states, you could have made much more money.

And then there are other cases. Like when I went from a PC to a Mac I purchased a little program for about $20 to turn my Outlook e-mail into something Mail.app could import. I HATED paying $20 for it, and I avoided it as long as I could. But after two days of fighting every free way I could, I bought the program and was glad I did (and wished I would have done it sooner). Had it cost less, I would have bought it sooner, but then they wouldn't have gotten much money ($5 probably would have done it). You also get things like TiVo. People balk at that (Why should I pay $12 a month for what I can get for free with my VCR?), but as a TiVo user I would gladly pay double that if they were going under at the current price. But how much trouble would they have selling them with a $25 per month subscription?

The only people who have it right are MS. They charge a ton, get a ton of money, and everyone is locked into (or at least thinks they are locked into) their software so they pay it. Everyone hates it, but most people don't do anything about it.

Re:software is worth..

[Ezdaloth]

With the difference that you can usually steal software without getting cought if you think it's too expensive. I wonder wether cheaper software would lower copying and/or increase profit?

E.g. at euro 50,- would enough people buy office instead of copying that revenue would increase?

Re:"Financial engineers??"

[tgrimley]

definition: design systems to fuck you out of your money

So that's where hookers come from!

Re:software is worth..

[ZephyrXero]

That said... free/open source software can be worth much more than pay/proprietary software ;)

*Shameless Self-Promotion :P

Re:Slashdot and SW

[Saeed al-Sahaf]

Most people here don't buy software - they get it from edonkey/torrents anyway.

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.

Re:I wonder if

[daniel_mcl]

Does your blog have anything to do with your comment, or are you just jamming it into your comment to trick people into going there?

I found nothing to do with software piracy whatsoever. If it's really that important, stuff your blog into a signature.

YES!..

[pickyouupatnine]

price of software =
time spent on making it
X 2 X (minimum wage in your area)
+
length of projected lifetime before next charged upgrade (as in the next time you plan to ask for the bling) X 2 X (minimum wage in your area) ... you get the idea :D

True Worth To Me...

[__aaclcg7560]

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.

One of the great things about software

[ShatteredDream]

Is that most of the cost that goes into developing it is in the labor. The only problem that companies like Microsoft face is that their shareholders have gotten addicted to the high profit margins that have dominated for so long in the commodity software market. Realistically, Microsoft could afford to cut the cost of Windows from $100 per upgrade disk to $50 a copy and from $200 for the full version to $75-$100 if they wanted to become more aggressive. Office could see similar price reductions, and in fact such a major price reduction might be enough to cause a lot of buyers to just say what the hell and buy the software even if they don't REALLY need to upgrade.

If companies like Microsoft really want to rake in the cash on support and upgrades, they need to make them cheap and exploit economies of scale. It'd be a lot easier to convince many companies to buy a support contract that costs $5-10/machine/month for support and upgrades than make them pay $250 for an upgrade every two years. With that monthly fee, the company gets seemless upgrades and Microsoft gets a guaranteed revenue stream from them.

Re:software is worth..

[Metteyya]

...unless there is monopoly or software doesn't have more-or-less equal alternatives (Photoshop, Autocad and so on).

Remember, that basic laws of free market (like the one in parent post) apply to market with equal (or almost equal) products.

If you are an architect and the only really viable piece of soft for you is Autocad, you can't speak of free market here.

What the competition is charging ?

[shashark]

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.
--
This sig is up for free.

Re:What the competition is charging ?

[mr_gerbik]

Think Netscape vs IE circa 2000 AD.

Netscape was dead by 2000.

Think Google Earth, Picasa, and Gmail. But hey, Google buying up companies and offering the software for free to kill the competition is a honorable thing right? Not evil like when Microsoft did it.

Re:What the competition is charging ?

[fermion]

Ah, this is interesting. I have been using browsers, media players, and operating systems for many years. I have never directly paid to use the former two. It was either a free download(perhaps FTP) or came with the machine. The later I have directly paid to add to a machine once in my life. It was CP/M. Otherwise it came with the machine or was an inexpensive upgrade.

What we learn from this is that utility, or operating, components are not so valuable in themselves. We buy a complete car, not a chasis, engine, and then oh, we need some way to control it.

But in the end the value of a product is not measured in resources consumed, but in what people, either the end user or advertiser or whoever, will pay to use it. Of course, if the value is not greater than the billable resources consumed, then the company will suffer, and if the value is not greater than all resources consumed, then society suffers.

MS continues to use IE as the carrot to keep people on widows. It value is soley to MS as a monopolistic tool. This is why it has been and will continue to be free, and why they are increasingly limiting the upgrade path.

Re:What the competition is charging ?

[Anonymous Coward]

But hey, Google buying up companies and offering the software for free to kill the competition is a honorable thing right?

I think now that Google is a public company it is inevitable that it will follow its motivation. The examples you cite, however do seem to be different. I don't see that any of these products are tied (pdf) to an existing offering, responsible for breaking a competitor's product or obtained through outright theft

Re:What the competition is charging ?

[xeno-cat]

"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. "

This is not the type of pricing formula the article is discusing. It is much more interesting than that.

What the author is basicaly saying is that Free software and proprietary software cost about the same once you figure out what you are actually paying for (by breaking out all the hidden elements and assigning them a value).

His conclusion is that, at least for the "enterprise" market, the service options are almost the entirety of the cost of the software, even when you include the list price for the software itself.

The difference between Free and closed software is in how the options are sold. With closed software they are sold by the company that ownes the software. With Free software anyone has access to the source and so can provide support to the same level as the original developer if they so choose. This creates a market for service where all the capitalist pricing pressures are at play. Closed software is more insulated from these pressures.

I'm not explaining it terrible well, go (re)read the article. It is the most interesting thing I have read in awhile.

Kind Regards

Re:software is worth..

[Rosco P. Coltrane]

Software is worth whatever someone is willing to pay for it, yes, in a non-monopolistic market.

Do you really think Windows is worth what Microsoft wants for it?

Re:software is worth..

[KyleWilson]

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)...

Re:Slashdot and SW

[phantomfive]

I've always been amazed at the dollar figures the BSA gives out for the "value" of "pirated" software,

Are you really? They are an organization with a specific purpose, and they're willing to exaggerate, manipulate and probably even outright lie to get what they want. Nevermind the good of society, as long as they have theirs.

This kind of corruption would stick out like a sore thumb, except there are so many other organizations that do it, the BSA fits right in. It's sad, but that's how the world is, and if you want to understand the world, you'll have to realize it.

Re:Slashdot and SW

[Kjella]

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

Piracy hurts OSS.

[Anonymous Coward]

Actually one could say that piracy hurts OSS. Why? Because it gives an individual one of the benefits of OSS (zero price) with the benefits of proprietary software (ease of use, familiarity, etc, etc). Why try the GIMP, or Apache, or any of the other OSS software when you can get the paid software for free?

Besides piracy also leads to market dilution, and various image problems. e.g A pirate copy of Adobe Photoshop could have spyware. Potentially ruining Adobe's reputation in the market.

An example

[Donny Smith]

Just this morning, I was wondering the same question.

There's this bulletin board software that I use.
It's open source, it's popular, it's free, but it is an unsecure piece of shit. There's a security fix for it every fucking month and once I got hacked because I didn't have time to update it for like 3 days (luckily the hackers - nice of them - only defaced the home page and left the mySQL DB untouched)

So this morning I concluded it SHOULD be free because I really wouldn't wanna pay or donate a single cent for that crap.

A lot of free software is worth nothing.
I know I'll get modded down for this, but really - think how much you would suffer if (for example) Postfix became commercial - you'd probably switch to qmail or whatever in no time. Big deal.
So for those free software that costs nothing, the value is probably equal to cost of switching to alternative.
For irreplacable free software, hmm, is there such thing?

Writing it Yourself

[yintercept]

The theory of labor would set the price of software somewhere below the cost of writing the software yourself.

With a good OSS layer available, the cost of "writing software" should be going down...which might be why big software companies nervous.

True Cost of Software

[bokmann]

I hate it whenever I see a sentence that equates the cost of creating software to the cost of copying the software.

I am a software engineer. the piece of software I work on has 18 people working on it full-time to write it. THAT is the major cost. Duplicating it is a trivial expense. The cost of the people has to be amortized over all of the copies generated.

I contribute to open-source projects as well; I do that for a different motive than putting a roof over my head. Congratulations to those who can do that entirely with open source; for me, open source is like pro-bono work for a lawyer; I want to give back.

All that aside, you NEVER pay for the true COST of something, you pay for its true WORTH. The soft drink you are drinking right now has about $.06 worth of sugar water in it. I bet the can, transportation, and refrigeration cost more than the contents. I won't even try to calculate the cost for a $5 cup of coffee at Starbucks.

Re:software is worth..

[SA Stevens]

Do you really think Windows is worth what Microsoft wants for it?

Isn't that a decision for each Microsoft customer to make? I take it from the tone of your comment that you're not one of said customers.

The previous sentence, BTW, demonstrates that Microsoft is not within a monpolistic market. (and the fact that I'm entering this on a Dell machine with NO Microsoft software on it reinforces that)