A few years back, nobody would've thought about giving software for free. It is something I work for, I expect to get paid for my efforts, so why give it away? And then came the open source revolution and turned things around. Suddenly, giving a piece of software for free makes sense. Well, if not, why so many people are doing it? Let's face it, almost every piece of software you use today can be replaced with a free software. Operating system, office applications, anti-virus (for those less fortunate who use a virus prone OS), graphical editing tools... everything. True, it may not be of the same quality (as I claimed in my previous post), but it will be free.
Many great articles exist on the topic of open source development. But this is not my focus today. Saying that a software is "open source" does not mean it is given for free, although this is usually the case. Going for open source development is a bigger challenge, as the business model is usually less obvious. I have enough challenges at the moment, so I'm aiming at the good old business model of selling licenses.
I will offer a Free Trial for sure. It will be fully operational, not a demo. The big question is around the free edition. The free edition will provide some functionality and "lure" users into buying the full edition. Let's start with the pros and cons and summarize with some useful points to keep in mind when considering a free edition. I collected these from various articles I read on the subject and from several interviews I conducted.
Pros for giving a "free edition"
- Instant Market - build an audience, fast. Take a look at SourceForge, possibly the biggest collections of open source projects. One of the great features of SourceForge is the ability to see download statistics for each project. In my area, for example, good tools can easily generate 5000 downloads a month with no marketing effort. I think many vendors in my area will be satisfied with these numbers (again, no marketing efforts). Especially for new projects.
- People know they can get tools for free, so they look for free alternatives. In my previous company, it was very common to favor free and open-source solutions over paid ones. Many people today prefer getting a little less and pay nothing. It's not just about money: the difference between a $50 and $70 is $20. The difference between free and $20 is a great barrier of opening your wallet. In a large corporate, opening the wallet can be a huge hassle and tons of bureaucracy.
- Free testing and feedback - people will test your software and report bugs. Most people expect less when they get a free edition, so you're not required to provide the same level of support.
Cons for giving a "free edition"
- Efforts - it's another edition to release and maintain. It will involve effort for building and testing. People do expect some level of support, so be prepared to provide that. A "free edition" of low quality with no support will have the counter-effect on your sales.
- Loosing potential paid customers - customers may be content with the free edition and may not see a strong reason to upgrade.
- It will require marketing. Otherwise, you'll end up slip sliding into a dark corner. True, there are tools with 5000 monthly downloads on SourceForge, but there are 100 times more projects with 10 downloads a month or less... With a very limited audience, you'll miss the goal of marketing the full version and the whole effort will be in vain. The question: if this requires marketing efforts, why not invest them in the original product? Well, it is easier to market a free product. But then again, the free product is not the basis of your business model.
- Are you attracting the audience from your targeted market segment? Relating to Geoffrey Moore's great book, "Crossing the Chasm", efforts should be focused on a limited market segment and penetrate the mainstream customers in this segment. However the people who download the free edition may not be of the same market segment. If it's a different segment, you'll need to struggle to reach mainstream with your free product as well. This, in turn, diffuses your focus from your main market, which is the basis of the business model.
Some key points to remember
- Carefully consider the difference between the editions. Give too much and nobody will buy your paid edition. Don't give enough and nobody will use your free edition.
- It's another product you're pushing to the market. It will require all the related efforts - development, deployment, support, marketing, etc. You're probably targeting a different market segment, so be prepared to conquer this segment.
- It's difficult to estimate how this product will help the sales of your paid products. However, if you have limited resources, you may want to consider safer and cheaper means of marketing.
To sum up, there are many cases where the free edition missed it's target. There are examples where it did help create a reputation and establish market dominance. For me, it's still a possibility. It's very reasonable for me to start with a simple edition, give it for free and proceed to develop the full edition. However, to put bluntly, I need the cash. I cannot afford burning "fuel" without any income. I may offer a free edition, but it will be later on in the process.
