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What should the minimum price of software be?

According to many folks on this forum, if I write a useful program, distribute it as open source, and lots of people download and use it, I am stabbing my fellow programmers in the back by undermining the value of their labor.

If I charged my users US$0.01 per copy instead of distributing it as open source, and the program was still popular, I assume that the people who object to open source would object to my price, for the same reason (unless the program was incredibly trivial). If I charged US$99.00 per copy, like FogBUGZ, I assume they wouldn't care (unless the program was incredibly feature-ful). Am I right so far?

What, according to these worthies, should the minimum price of a computer program be? (Presumably this would be expressed as a certain number of cents per line of code, or some other metric.)

If someone offers a program for sale at this minimum price, and doesn't find any buyers, how long does the seller have to wait before offering it at a lower price, or releasing it as open source?

Of course, most programmers do not actually get a direct share of the licensing fees that their code generates; instead, they get paid a salary while they're writing the code, and possibly stock whose value depends on the profitability of the company as a whole. Before a programmer accepts a salaried job, what kind of due diligence should he or she perform, to confirm that the company is selling its products at the right price?

If a programmer is hired by a non-software company to write some code that is intended purely for the employer's internal use, should the programmer specify in the employment contact that the code is not to be shared with any other company, only sold at the stipulated minimum rate?

Seth Gordon
Thursday, July 31, 2003

I think you should do whatever you feel like doing. If you create something useful and manage to get a whackload of users then all power to you. If I created something useful, I would probably do the same.

Depending on what the program is, I could do it for ego boosting, so my WinAmpKiller or MSNKiller would go into the open source.

However if my intended clients were companies I would charge for it, since companies distrust things that doesnt cost them any money. If it doesnt cost me anything, what good can it be?

So, I think that open source doesnt undermine the industry really; since the people that uses open source only wouldnt pay for software anyways, and the companies that employs programmers does not use open source to a very large extent.

Ofcourse everybody uses Apache and some Linux boxes, but as long as you deal with corporate end users, open source software is not really an option.

Feel free to disagree :-)

Patrik
Thursday, July 31, 2003

You should price it for the most money.  If you can sell 1000 copies for $100 but only 20 for $500, sell it at $100.  There is an art to this.  I learned long ago in a marketing class that when Mobil 1 synthetic oil appeared on the market it was test priced at the same price as regular oil, twice as expensive and 4 times as expensive.  More people bought the most expensive oil.  You see, they attached more value to the expensive product. 

In short you need to figure out what value your market perceives your product as having and price accordingly.

Mike
Thursday, July 31, 2003

You wrote it, so you can give it away, charge people for it, request donations to your favourite charity for it, even only provide it to people who send you videos of their dog doing tricks if you want.

By the way, in all these "Open Source is EVIL" posts, why has nobody mentioned things like the last paragraph on http://cygwin.com/licensing.html ? (Sorry if I missed it and someone did, but I have to confess as to getting tired of those threads very quickly.)


Thursday, July 31, 2003

The price should have no relation whtsoever to lines of code, or really even the cost to develop. Unlike hard goods, software has a variable cost of zero so you have much more flexibility in pricing. It's cliche, but you should price your product at what the market will bear. Things to look at are customer cost savings or revenu generation from product usage, cost of alternatives and competitors, pricing strategy (e.g., high or lo volume).

pb
Thursday, July 31, 2003

I would not claim all software should be charged for (although one could imagine anti-dumping regulations could apply, but could not be practically enforced).

Look, there is a constant war between different business models. In the red corner we have those that are trying to replace a large chunk of custom development with COTS, Common Off the Shelf things (how many millions of consultants hours where evaporated by Excel?), in the blue corner we have those that want to snuff out the COTS producers and get everybody to rely again on consultancy and support contracts.

The only thing I claim is that the benefits of tax-funded software development should be available to the taxpayer, and that the GPL disqualifies this by placing arbitrary restrictions on the exploitation model, while the BSD licence seems more in line with this.

Just me (Sir to you)
Thursday, July 31, 2003

There's a russian saying: "On any market there's at least two idiots: one who asks for too less money, and one who asks for too much money."

Johnny Bravo
Thursday, July 31, 2003

The basic argument is fallacious. By that logic, doctors who volunteer at a clinic on the weekends should be castigated for undermining the value of their colleagues' labor.

John C.
Thursday, July 31, 2003

" There is an art to this.  I learned long ago in a marketing class that when Mobil 1 synthetic oil appeared on the market it was test priced at the same price as regular oil, twice as expensive and 4 times as expensive.  More people bought the most expensive oil. "

In retail there's also the dynamic of how the retailer uses shelf space.  So if a retailer can make money on a higher margin item, that will probably get more shelf space, thus marketing, thus sales.  So yes, it's probably some of both.  But don't underestimate the interplay of the retailer and wholesaler's incentives.

Jeremy
Thursday, July 31, 2003

Look at open source programs this way: they free programmers to do other things.

You get the arguement all the time:"open source killed my money making program."
Well a) Did you really expect to write one app and keep making money on it forever without anymore work and
b) Why don't you write another program that makes money.

Think about it, before access or X-Base came along (Not open source, but very very cheap compared to the alternatives at the time) people could use oracle or db2 (hideosly expensive) or waste time reinventing the wheel by creating their own database. Now with access, mysql and Postgress everyone can skip implementing the dbms part of their app and concentrate on whatever else they are doing and if they need something special that the distributions don't provide they can customize postgress rather than writing everything from scratch.

So, yes open source/cheap spftware  kills some people's incomes (although not their ability to earn more money), but it also allows even more people to build new apps on top of it.
Usually the relationship between opensource and commercial apps is many to one as well. I.e. just think how many consulting hours for custom apps linux created buy allowing companies to save budget dollars on hardware?
Or how many Apps exist that would have never been implemented if people had to shell out 50,000 dollars on an oracle license just to get the database.

Open source does raise the bar by forcing developer to do new things, but it is not hurting the industry as whole because in many cases it smashes barriers to entry

Daniel Shchyokin
Thursday, July 31, 2003

Make it donation-ware. Ask everyone who uses it for more than a month to donate $10 to their favorite charity.

www.marktaw.com
Thursday, July 31, 2003

Price is directly related to the value of the problem solved by the product. A 10 line script that solves a million dollar headache is worth a few hundred thousand. A 10 line script that sends your address book to spammers is worth negative hundreds of dollars. Almost everything else lies in between.

Pricing your software should take into account the cost  of the problem, less a certain amount that makes buying your product more compelling than either simply dealing with the problem, buying someone else's product, or building your own solution.

The only surefire way to determine the best price is to price test, with all other variables held constant. In lieu of that, people who know their market well and have been doing marketing a long time can usually take a reasonable guess. But there is really no substitute for testing.

Matt
Thursday, July 31, 2003

Some of you seem to be missing my point.

Yes, according to the principles of the free market, I can set my price to whatever I want, and either reap the benefits or suffer the consequences of that price.

But some people here, on other threads, are arguing that Open Source is a bad thing, because if enough people exercise their freedom to set their software's price at "zero" or "compliance with the GPL", it will hurt other programmers' abilities to make a living. These people obviously *don't* want me to set my prices according to the principles of the free market. So, in their opinion, what principles should I use?

Seth Gordon
Thursday, July 31, 2003

Seth, I think the people you're referring to love to preach the good word of the free market when it suits them - like when they need to squeeze some more work out of someone for example - but call for some kind of collective price fixing in the industry (did someone just say union?) when things aren't going their way.

My guess is that they watched 'Wall Street', heard the bit about 'Greed is Good', thought it was really cool and concluded that all the other pejorative words they kept being hearing after their name was mentioned must be desirable traits too - words like 'dishonest', 'thieving', 'hypocritical' and 'wanker', for example.

OC
Thursday, July 31, 2003

Seth,

You're tying yourself up in knots over nothing. If your pricing structure puts another programmer out of work, good for you. That means you had a successful project, one that killed the competition.  Probably it means that your software is better, since it had to convince people to move to a new platform.

Sure, some people will get bent out of shape about this. Effem.  Be glad you wound up on top. And get ready for a fight, because somebody is going to knock you out of your position.

Clay Dowling
Thursday, July 31, 2003

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