
Impossible to compete with free software - mattjung
http://discuss.joelonsoftware.com/default.asp?biz.5.737375
======
tptacek
One place where it's very easy to compete OSS is in the enterprise. For an
enterprise, the license cost of software is only part of the total cost, which
includes:

* Piloting, operationalizing, and deploying the code.

* Staffing maintenance and support.

* Training.

* Tracking and deploying new revisions of the code.

In fact, I think a lot of people have had the same experience I have, which is
that it can be easier to sell software to an enterprise than to give it away.

The flip side of this is that for business/enterprise software, there is very
little risk in just making your code open source and then selling a commercial
version. Prospects will download and play with your code. They'll pre-qualify
themselves, calling you only when they're receptive to the software's value
prop. The people who will operationalize the free version probably weren't
good prospects to begin with.

~~~
patio11
_One place where it's very easy to compete OSS is in the enterprise._

Another place is B2C. All of the following sell B2C software:

\- User experience that doesn't hurt. (Have you ever put a non-technical user
through getting software from sourceforge?)

\- Marketing. (It isn't evil. Most of your customers know how to describe
their pain to Google but they don't know how to conceive of the solution, and
they probably don't know the computer can help them. Your mission, should you
choose to accept it, is to explain how the link between unhappy present and
happy future is use of the appropriate software -- YOUR software.)

\- Speaking the users language (hint: "GPL", "XML", and "multimedia engine"
are three words that my B2C page does not share in common with my OSS
competitor.)

\- Design. ($25 of stock icons doubled my sales back in the day. Most OSS
projects do not have anyone who would care enough to secure the equivalent.)

\- Answering emails such as "I can't email the hard drive to the download"
with respect and patience rather than that special brand of community the
question would get on most OSS mailing lists.

\- A web site that _sells_ the product/download/etc. Rather few B2C OSS sites
are written by someone who sounds like they actually WANT you to hit that
download button. They're like sculptors adding navels to statutes: they know
it has to have one but the task is boring and detracts from the interesting
parts of the project, so it is completed in as perfunctory a manner as
possible. You'll never hear an OSS developer saying "This is the 47th
iteration of our Download Now button. Its 350% more effective at getting the
click than v1.0"

~~~
critic

        Design. ($25 of stock icons doubled my sales back 
        in the day. Most OSS projects do not have anyone 
        who would care enough to secure the equivalent.)
    

I'd love to hear more about this (before and after pictures, etc). What are
those stock icons? Did you have no icons before?

~~~
patio11
The experience was originally written up here:

[http://www.kalzumeus.com/2006/08/26/the-visual-impact-
stock-...](http://www.kalzumeus.com/2006/08/26/the-visual-impact-stock-icons-
make/)

But its so long ago that both the before and after photos were overwritten in
the the intervening years. I had icons, though, in roughly the same positions
as they are currently. You can see the old version here -- not the best photo
but it suffices:

[http://www.topdownloads.net/section_images/software/11552149...](http://www.topdownloads.net/section_images/software/1155214957.jpg)

They were from Sun's Java visual identity set, which was attractively priced
when I started working on a Java project with a $60 budget. You can see them
here:

<http://java.sun.com/developer/techDocs/hi/repository/>

The ones I was using were the open, save, print, and new document buttons. If
you notice, they do not look like the sort of thing you would expect an
elementary schoolteacher to have in her classroom. I knew the sort of look I
wanted: big, bright, bold -- like a Fischer Price toy. Then one day, while
browsing the Internet, I saw an icon set that gave exactly that for about the
price of one copy of my software. So I snagged it, on the theory that if it
resulted in one marginal sale it was worth it.

I've used those buttons continuously since August 2006, so you can see them on
the front page of my website (<http://www.bingocardcreator.com>). Note that
they're big, bold, and colorful. That increased my visitor to download
conversion rate and download to purchase conversion rate, instantly. Take a
gander at the difference between the 08/06 and 09/06 bars here:

<http://www.bingocardcreator.com/stats/sales-by-month>

As you can see, it was worth rather substantially more than 1 marginal sale.

(Wow, thats a blast from the past, reminiscing about when the difference
between $300 and $500 was a _huge_ improvement to me...)

------
mixmax
I would actually say it's not that hard to compete with free software. Here
are a few reasons:

\- Open source is free (as in beer). This means that there's no support, no
training and noone to blame if things go wrong. As anyone who has worked at a
semi-large business will attest that is bad from a corporate buying
perspective.

\- The UI design of open-source software is often terrible. Open-source values
code, not pretty design. I've never heard of an open-source solution that has
gone through formal usability tests. Often customers don't care about pretty
code, they care about a pretty UI.

\- There's noone to turn to with feature requests, etc. And no, for most
companies submitting a request to sourceforge or just coding it up yourself is
not an option.

\- There's no marketing for open-source software. Marketing sells producs,
otherwise companies wouldn't spend trillions a year on it.

\- You have no guarantee that your open-source software will be updated in the
future. It might just be abandoned. And again, for most companies just doing
it yourself is not an option.

In summary, using open-source software requires you to know what you are
doing, being able to overcome installing and maintenance hurdles without
support and living with the knowledge that the software might not be updated.
And you'll have to actively go out looking for it, because noone will try to
sell it to you.

Most business-types, who are the ones with money to spend, don't even know
that there is such a thing as open-source software, and if they did many of
them wouldn't use it for the reasons stated above.

~~~
ionfish
_I've never heard of an open-source solution that has gone through formal
usability tests._

WordPress has.

[http://wordpress.org/development/2008/10/usability-
testing-r...](http://wordpress.org/development/2008/10/usability-testing-
report-25-and-crazyhorse/)

~~~
hernan7
GNOME too, at least back in the day

<http://live.gnome.org/UsabilityProject>

KDE too, apparently: <http://usability.kde.org/>

------
brk
There are some good comments there.

I think that Free Software, in all forms, has helped raise the bar for paid
software. I remember paying for some really simple and crappy stuff
(commercial software) back in the 80's and early 90's. A lot of it was stuff
that has a comparable free counterpart today.

I do not believe that any legitimate valuable software product has lost a
significant piece of their marketshare to free software. The free options HAVE
required that the paid software have a true value though.

~~~
Xichekolas
> _I remember paying for some really simple and crappy stuff (commercial
> software) back in the 80's and early 90's._

My company is still paying for really crappy software instead of using free
alternatives. They just slap the label 'Enterprise' on something crappy, and
sadly companies just eat it up. Granted, there aren't really a lot of free
alternatives to most enterprise software... most likely because ERP middleware
is not fun to do in your spare time.

~~~
silentbicycle
I can't find the exact quote to properly cite it, but somebody once said
something like, "Stick five of the best open source programmers in a room for
a week, give them a really hard problem, and you'll get three mail readers and
two text-mode web browsers."

------
SwellJoe
We do both. Our company builds 90+% Open Source software, and a small chunk of
proprietary code that sits on top.

Our Open Source products have millions of users.

Our proprietary software has thousands of users (well, actually one thousand
and some hundreds...I don't think we've crossed the 2000 licenses sold mark,
yet, but it's getting really close).

So, in one sense (raw numbers), we can't compete with Open Source. Even with
our own software. But, when I look at the percentage of paying customers we
have that we wouldn't have without the Open Source products, the math begins
to look less depressing. Maybe we just have a really high marketing budget
made up of lots of development hours spread over the past 11 years...and over
time we'll convert more and more of those Open Source users into paying
customers.

That said, it's definitely possible to convince people to pay for software.
Just make it better, easier, better supported, and more predictable over time
(make upgrades that work, for example; almost nobody gets upgrades right,
including most Open Source software...so if you do, people will remember it
and won't be nearly as tempted to try a new product every time a major upgrade
or new system is needed).

Also, it matters who you target. We have some Open Source users who want our
commercial products to be even cheaper, insisting that we would sell _huge_
numbers if it just cost half as much. But, I know the reality is that the
difference between free and $69 is almost as big as the difference between
free and $138, in terms of how many people will make the leap. So, targeting
the low end of the market for a product that has Open Source competition is
insane. Target the high end, luxury end, or enterprise end. Power users, Apple
users, professionals who make a lot of money by using your software, etc. We
actually decide what goes into our Open Source vs. our proprietary product
based on whether it helps someone make money. That's pretty much our only
determining factor: Does it make money for the customer? If yes, it's
proprietary software. If no, and there are lots of cool non-commercial uses
for the feature, then it goes into the GPL version. That won't work for
everyone...but it works for us, since our market is one that has a pretty
clear divide in who uses the software and for what.

------
omouse
I hate the word "free", it always makes people think of free beer.

You _can_ charge $$$ for Free Software and "open source" software.

One day I'm going to get pissed off enough to start selling the GIMP for $100
or something, just to prove this point. Maybe no one will buy it, but you
_can_ do it. And hey, maybe it'll encourage people to "pirate" it and increase
the number of users?

~~~
bmj
Using the GIMP example...if you put together a manual for Photoshop users on
how to use GIMP, you could probably charge $100 for the manual and the
software and see some sales. Photoshop is costly, but if your staff is used to
Photoshop, the leap to GIMP can be difficult and filled with searches for
information.

A concrete example: a friend is a project manager at a local design shop. He
is a designer by trade, so he knows his way around the Adobe suite. But, his
employer doesn't have the budget for another Photoshop license, but I'm
guessing they would shell out $100 for GIMP and a "GIMP for Photoshop Dummies"
book.

~~~
HeyLaughingBoy
To followup on that idea: pick a particular segment of the graphic arts
industry and find what Photoshop features they use that GIMP is good enough
at. Then write the manual _targeted to them_ that explains how to use just
those features. Also if you change the GIMP UI (god, I hate that thing!) so
it's optimized for those tasks, I'm sure you could sell it for at least 1/2
what Photoshop costs.

~~~
cschwarm
Yes, maybe you could sell one or two or maybe a hundred copies but hardly any
more.

The more successful your fork, the more likely it's going to be packaged and
distributed by the one of the top distributions for FREE. The higher your
sales price, the more likely people will buy just one copy and share
additional copies among themselves.

Now consider the costs: Changing the UI of GIMP seems to be no easy task,
otherwise someone would have done it, already. People are complaing about the
interface for the last ten years or so.

In other words: Yes, you may be able to make revenue by adding features to the
GIMP, but you're unlikely to make a profit!

------
cturner
I'm oriented around the "enterprise". The mainstream free software I work with
tends to be powerful but difficult to learn to use effectively.

As far as I can tell it's reasonably difficult to find people who are able to
work through simple network connectivity problems without paying a lot of
money.

Here's a two minute business model for someone who aspires to start a mISV:

1\. Learn how to methodically diagnose connectivity problems between points on
tcp/ip networks.

2\. Identify a niche with money that relies on connectivity.

3\. Write some software for people in the space (or find some free stuff that
does it that other people don't have time to learn how to learn)

4\. Become known as a person who uses such software to solve problems.

5\. Profit!

------
callmeed
I think its important _not_ to think of free software as mutually exclusive
with paid software.

It's been proven that you can create a profitable business by creating open-
source/free software and building a business on top of that. Same goes for
SaaS apps that have free plans.

Take a look at the article on Zimbra that was just posted. 40 million paid
email boxes. Yet, there is an open-source version of Zimbra's software suite.
Similar things going on for places like RedHat, MySQL, Google Apps, SugarCRM,
etc.

You can create an open-source app and reap the benefits of it ... and still
make money by:

\- selling premium versions

\- selling support

\- selling hosting with per-seat licensing

\- selling add-ons and custom development services

~~~
patio11
_You can create an open-source app and reap the benefits of it ... and still
make money by:_

\- using the OSS to power, sell, etc a closed source application

Anybody can come download my shopping cart any time they want. It still earned
me a few hundred dollars this week.

See also Rails (open source framework powers immensely profitable closed
source applications), etc.

------
jjs
Free software is a common bogeyman on the Business of Software forum. It's a
handy scapegoat for when your new µISV experiences disappointing sales.

You'll note that the guy who asked the question was trying to find an excuse
not to _start_ a business, and how quickly cooler (and more experienced) heads
prevail.

------
akincisor
[http://www.valt.helsinki.fi/staff/herkia/kava/Seminnarit/MI_...](http://www.valt.helsinki.fi/staff/herkia/kava/Seminnarit/MI_mustonen.pdf)

That paper has a (simplified) model for the economics of free and proprietary
software in the same marketplace. It basically shows that the best programmers
have incentives to work on free software. It also shows that the price that
the proprietary software maker places on the product directly affects the
number of programmers working on the free alternative. Very cool paper that I
reviewed for an economics course.

------
doki_pen
The market is changing from: create something and try to sell it, to: get paid
to create something. This has always been the case for programmers that work
for a product company. They agree to a price(their salary) before implementing
the software. Of course, this is nothing new, consulting practices have always
operated this way. The ony way open source hurts devs is that open source
encourages reuse. Devs are paid over and over again to create the same thing.
This is a much more efficient(in terms of effort) way to do things. Companies
will always need new features and custom integrations. Obviously this does
hurt "product comapnies", but do we really care? If we don't need something
anymore, let's throw it away. It's wasteful not to.

------
TomOfTTB
But for any software used by a business it seems pretty simple. You simply
need to match the free software in features (or get pretty close) and compete
on support.

The key question is "What if something goes wrong?"

Because a business owner can’t really use open source stuff unless they (a)
know enough to edit the source competently or (b) can afford to hire someone
who does. Assuming there’s a large market of founders who can’t edit source
code themselves and don’t want to pay $100+ an hour to have someone else do it
you end up with a pretty wide open market.

Corporate America will always be risk adverse which means the deck will always
be stacked against free stuff. The trick to competing is just stoking the
fires of that fear and then making your software look like the remedy to all
of them.

~~~
tptacek
I think that might depend on the value proposition of your product.

For the kinds of products that need the whole dance of vendor selection,
budgeting, pilots, and rollouts, then yes: feature parity, or even a small
feature deficit, is easy to overcome with a strong support pitch. That's
because the sales process for these products gives you the opportunity to lay
out a business case.

But a lot of software doesn't get deployed that way. They may have a more
casual value proposition, they may be more "niche-y" (and thus less visible to
the pointy hairs), or they may be early adopter products.

In this second category, I think it's harder to make a "support" pitch. If
your prospect isn't 100% sold on the value of the product (and companies buy
"phase 1" deployments of products to test the water all the time), they're a
lot more likely to optimize for cost.

I think it's worth being cognizant of which category you fall in to. I think
if you're in the second category, the right play might be to open source
yourself. Again, just because you open up your code, doesn't mean enterprises
will be significantly more resistant to pay for it.

------
sh1mmer
If you look at all examples in this thread all the software they refer to is
GUI based non-technical applications.

I think this highlights where Open Source competes the most, applications
which the engineers build for themselves. Apache, for example, makes building
a paid for web server pretty uneconomic (IIS is bundled).

When engineers doing Open Source are scratching their itch they tend to make
world beating products, when they aren't scratching their own itch the
momentum tails off because there isn't another driver (such as a wage, or a
product manager).

------
iamwil
If there is a lot of good free software to compete with you, it might be that
you're trying to sell what is considered commodity. Usually the mature open
source software projects are usually infrastructure ones. Unless you've come
up with something to reinvent that product, it might be more prudent to build
on top of open source software, and use it to your advantage instead.

------
krschultz
FOSS lowers your revenue if you want it to or not, but if you play ball it can
lower your costs so that you can make the same profit anyway. Aim for B2B
sales of complex software over consumer - especially now - and the open source
part won't actually cost sales while allowing students and hobbyists to learn
your system for free.

------
yesimahuman
Take the fact that many people who buy software can't use it without
help...free software will never out compete "paid" software, where help is a
major portion of the product.

------
ahoyhere
Why did this get posted here?

It's a dude who thinks he wants to start a business, but he's saying "You
can't do this." Is it a question, or is it an opinion?

And anyway, we all know, of course you can compete with free. Look at
Microsoft. Look at Apple. Look at Adobe. Look at all the indie Mac devs and
small shops. There are free alternatives to every one of their major products.

