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When free isn't

August 16, 1999
by Zac Belado

Given the exceptional number of free software titles available on the net, you would be excused for thinking that most software companies had developed into community minded non-profits. Apple gives away its streaming video server software, Microsoft gives away their IIS web server software and almost everyone gives away web browsers as if they were the digital equivalent of old National Geographic magazines.

But despite all this largess, there are practical economic factors at play that help drive the decision to give software away. Factors that, in most cases, make it more expedient for computer users to *not* use free software.

There is a wide range of free software available to the average computer user. Most of it, with a few exceptions fall into three categories

  1. free software from large corporations - folks like Microsoft who give away IIS (Internet Information Server) and Outlook
  2. free software from individuals - people like yours truly who find it less hassle to give away software binaries than it is to sell them
  3. Free Software from community efforts - groups (or even individuals) that give away binaries and source code for applications

At first glance these seems to be closely connected categories. In all three cases the end user is supplied with a product for free. The only real difference is that some apps (Free Software) come with the source code. But the real difference between the three is the effect they have on the market for software. For the purposes of our discussion we are concerned with the distribution of free software that is being distributed by for-profit corporations.

Context is everything

To quote a recent movie disaster, "size matters". If I give away a piece of software then it really has little effect on other developers. Even if the software is exceptionally good I can only spend so much time on something that I am giving away for free. When a company like Apple or Microsoft does the same thing then it has a much greater and more dangerous effect.

Take a look at Internet applications. The average user can now assemble a suite of Internet applications (browser and email) for free. Netscape and Microsoft both offer applications to handle both browsing web pages and reading/sending email. This has effectively killed the markets for paid web browsers and email clients. Eudora, which used to dwarf all its competition in the email client market (on both platforms) was recently on the selling block by parent company Qualcomm. There were no takers. Little surprise.

Now before we continue I should explain that I have a vested interest in this issue. The newest version of Outlook Express for the Mac includes a feature to "break out" mailing list digests into individual messages. I write and have (had?) plans to distribute an application for the Mac that had similar features...but that wasn't bundled into an email client. I now have to decided if I want to continue to develop the app or not. Not a nice choice to have to make. The only saving grace in this is that I never had plans to sell the application. I can not begin to think how I would feel if the application had been a part of my business plan.

What price freedom?

The primary reason for a company to release free software is to eliminate competition. No corporate entity would release a product for free, if they could sell it for cash, unless there was a compelling reason to do so. In fact, most companies would get sued by their shareholders for lack of due diligence if they did so. So why risk this by giving the software away? The reason is, of course, that by getting people to use their software they reduce the profits of their competitors, and eventually, eliminate competition in that market.

If you want to use a new piece of software, you have to look at the cost of conversion of the new package. This is the cumulative total of all the costs that you will have to pay to switch from using package A to package B. This includes, but is not limited to, training costs, new hardware and, most importantly with single users, the price of the package. But if the price of the new software is zero then the apparent cost of conversion is zero. Software goes from being a planned purchase to being an impulse download.

But all of this does come at a cost. And the primary cost is a lack of competition in the marketplace.

And then there was one

Netscape started giving its browser away in response to Microsoft's free Internet Explorer. Netscape suffered bottom-line hemorraging when Microsoft released IIS for free. Apple and Qualcomm can't make money selling their email clients since Microsoft started giving away Outlook Express.

Starting to see a pattern?

In most markets this is called dumping. And it is, according to most trade agreements, illegal. If one company sells a product for less than it costs to produce the product then its competitors can appeal to the government or various trade panels to get the practice halted.

Which makes one wonder why a disruptive practice that engenders lawsuits and punitive tariffs on products in the "real world" generally gets hailed as a great consumer windfall on the net? Would this practice be heralded as a good deal for consumers if most computer industry writers and pundits (like John Dvorak) wrote software for a living?

Wherefore art thou profits?

I think it a sign of a lack of foresight by most industry observers (and magazines) when this practice isn't decried. PC Computing, which relies on advertising revenues from software developers, runs a regular "A-List" column where they judge the relative merits of software products. Free offerings from companies (primarily Microsoft) are invariably qualified with an exuberant comment about the lack of price. Odd comments considering the money that Microsoft competitors pay to have their ads in the magazine and even more peculiar when you look at the ultimate cost of free software.

As it currently stands, Microsoft has decided that no one can make money in certain areas of software development. They give away their web server, they give away their contact manager and calendar app, they give away their web browser and they give away their email client. Increasingly the non-Microsoft software developers are either in a market where Microsoft needs software profits (like Office suites), a market providing ancillary services to Microsoft products (like Excel and Word add-ons) or in a market that Microsoft hasn't entered into yet. If Microsoft continues to give away software there might come a time where the software market is made up of nothing but Microsoft products.

Troubling if you're a consumer and, one would think, even more troubling if you ran a glossy magazine that depended on advertising dollars from a strong and diverse marketplace. Which does nothing but further reinforce my belief that most computer industry magazines are secretly run by chimpanzees...are rather dim chimps at that.

It's either my way...

Which makes the increasing popularity of Free Software projects like perl, Apache and Linux make even more sense. Not only is it increasingly hard to get software that fits your needs (due to the lack of options caused by the hegemonic actions of MS) but it is increasingly harder to make a mark in the software industry. If you're an up-and-coming software developer, then the Windows market must leave you rather disheartened. All the major apps are developed by Microsoft, the server software is developed by Microsoft and the productivity applications are all developed by Microsoft. And to make it worse most of them are free.

Before you've even written more than a few lines of code you've found yourself relegated to a niche position. Hardly the position that anyone wants to find themselves in.

Which explains why Free Software projects like Linux and Apache find so many programmers and why the bulk of Microsoft programmers seem to be making ActiveX components for Word. Not that this means that Windows programmers aren't as talented as the people who work on the Linux kernel and Apache...just that they are working inside a system that would rather control than see a flourishing market.

So the next time you get the urge to download some great new free product... consider whether you can really afford it.

Zac Belado is a programmer, web developer and rehabilitated ex-designer based in Vancouver, British Columbia. He currently works as an Application Developer for a Vancouver software company. His primary focus is web applications built using ColdFusion. He has been involved in multimedia and web-based development, producing work for clients such as Levi Straus, Motorola and Adobe Systems. As well, he has written for the Macromedia Users Journal and been a featured speaker at the Macromedia Users Convention.

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