Do you remember when building a website required an intimate knowledge of HTML and hours of pain just to get off the starting blocks? Or how about a CMS starting at $100K? That's less than 10 years ago and yet today, 'free' is the mantra for modern software. Phil Wainewright bemoans the apparent lack of education in the fundamentals of economics:
My worry is that the culture of free money has become so ingrained that everyone under thirty-something is convinced that money can simply be conjured out of thin air by making promises for the future, rather than having to be earned from actual work that delivers real-world value today.
In the meantime, Andrew Nusca gets Chris Anderson to talk about the economics of 'free:
ZDNet: You talk about innovation with regard to monetizing upstarts right away. So are companies that are already big and money-making at most risk, innovation-wise?
CA: It’s hard to identify a software company that doesn’t use Freemium in a way. (Editor’s note — At this point, the two of us think about what companies are exceptions. IBM? No. Cell phones manufacturers? No. We come up with none, short of automobile manufacturers.)
Question: anyone know of a 'try before you buy' sofa company? If so then I'd like to know. Or how about 'eat before you pay' at the local supermarket?
And then we have our old friend Twitter. Having spent the last few years building an obsessional following for free, it now finds itself in the invidious position of being unable to find a model that people will likely pay for:
A number of companies use Twitter for customer support and general engagement purposes, including Comcast, Starbucks, Amazon and Agent Provocateur. Some firms, like Zappos and GoDaddy, have more than one employee frequenting the site to improve their brand personas.
And while few complain about the quality of their Twitter experience, companies appear unreceptive to the prospect of paying to tweet.
VP Bob Pearson of communities and conversations at Dell stated, "If it becomes complicated and costly, our instinct would be to move elsewhere."
Have we reached a point where nothing has value or what value it does have is so miniscule that even micropayments will be resented? Not according to the bankers on Wall Street.
I've long felt that software - of itself - has almost zero value yet enterprise seems happy to fork over millions of dollars for 'stuff' that comes with a guaranteed basket full of bugs and a maintenance contract that will see business paying twice over in five years or less. Chris Anderson thinks this about being secure:
The market’s divided — there’s a people who are price-sensitive and not terribly demanding in their software needs, and maybe that will go free. Then there’s the enterprise – different set of needs – they’re not paying for software, they’re paying for support – a contract. They’re not paying for software, they’re paying for security. In a sense, Microsoft’s in the risk-reduction business now.
Is he serious? I guess so because for long enough we've heard how companies only want one butt to kick: usually one of Microsoft, IBM, SAP or Oracle. Even if the reality is that companies have multiple vendors providing multiple applications..services...hardware...support...infrastructure...etc.
Yet the saas model finds itself constantly under the gun for as yet to be specified uncompetitive economics. And that could go 'free.' Running appplications in a multi-tenant environment, the purist's idea of saas, means the operator has access to a wealth of data that is simply unavailable through on-premise systems. Benchmarking alone would be a valuable service for which I can imagine many companies paying. Oh - and did I mention? It ain't free. It's just in another bucket of money we don't call maintenance money but value add.
And guess what? You could almost use that as a reason for dispening with toxic audits. There goes another multi-billion dollar business. Along with the ambulance chasing fraternity in the legal profession. I doubt anyone would miss them in that particular 2 for 1 closing down sale.