Writings on technology and society from Wellington, New Zealand

Thursday, May 22, 2008

Paying for software when there are free alternatives

I talked today on Radio New Zealand National about the contrast between pay-for software and software that is free to use. Why would you pay for something you can get for nothing?

I’ve blogged about this before, but this radio programme has some different angles. Read on for my speaker notes, or pull the podcast.

Q: OK, so how do you compete against free software?

A: It can be tough. Let’s do some terms here first – when I say free software today, I’m talking about software which is free of charge to use. There’s an actual term “free software” which implies somewhat more than that – that’s software that’s covered by the GPL or general public licence – the distinction is often called free as in speech versus free as in beer. Both kinds can cause you problems if you have business creating software and selling it.

Let’s suppose you have a business writing and selling software. Your biggest single problem with free software is the obvious one: why should your customers pay money for your software when they could get free software?

Q: But there are plenty of big software companies out there!

A: Yes, well there are a few big ones and a lot of little ones, anyway. So, they must have a way of competing with the software that is free to use.

Q: How do they do it?

A: There are a number of ways. First of all, they would like to convince you that their product is better than the free alternative.

Q: Is the pay-for software better?

A: It doesn’t matter if its better if the customer can be convinced that it’s better. And remember, we hate to admit making mistakes – if something’s more expensive, we tend to think it must be better. So we will tend to assume that a $30,000 car is better than a $20,000 one for instance. But, to answer your question on whether pay-for software is actually better – it depends. There’s a lot of great software out there, and some of it is free. And there’s a lot of frankly shoddy software out there and some of that is free too.

To give a few examples – the whole Internet pretty much runs on free software. Without free software there wouldn’t be an Internet. It’s really worth emphasising that – the Internet is a free software initiative. It may be the biggest single engine of economic growth in the last decade. So, there’s nothing wrong with free software. And there are free alternatives to mcuh of the everyday pay software that people are used to paying for. There’s Linux, which could replace Windows on most people’s computers if they wanted it to.

Q: But Windows comes free with a new computer.

A: The cost of a copy of Windows is rolled into the cost of a new PC – it’s not free. You can try asking for a discount to not have Windows. I asked a Wellington computer shop the other day – how much for a machine without Windows on it – and they said $100 discount. So, I could buy that, stick an Ubuntu Linux CD in the CD slot, start it up, and get a machine running free software.

Q: It sounds like a fair bit of effort.

A: It certainly does sound that way. Actually, it’s pretty easy, but it’s unfamiliar to most people and people may find it a bit daunting.

Q: So why don’t the computer shops supply machines with Linux on instead of Windows? That way they could sell them much cheaper!

A: That’s the crux, isn’t it! Computer shops that sell machines with Windows on them – and that’s all shops apart from the Mac only ones like MagnumMac or TotallyMac – always supply Windows on their machines. A few shops will offer you what they call an “upgrade box” with no Windows, and generally no hard drive, you are supposed to just take the hard drive with your copy of Windows on it out of your old machine and swap it in.

Q: That sounds like work!

A: It’s not hard but you have to know what you are doing.

Q: You still haven’t answered why the shops don’t just supply Linux instead of Windows.

A: The shops all have to sign deals to get Windows. These deals are all commercially confidential. People have speculated that these deals basically require shops to install Windows on just about everything they sell or they have to pay much more for Windows, which would make them uncompetitive.

So, that would be one way to keep your revenue if you were a software company trying to compete with free software – use commercial arrangements with retailers to limit people’s choice. That only works if you already have the lion’s share of the market but it’s a good way to try to keep it.

Q: What other ways are there?

A: Well, you try legal threats against people who use free software.

Q: On what grounds?

A: You could assert that the free software contains other people’s intellectual property, for examples. A company tried that a few years ago – we’ve talked about the before. They were called SCO, and they started suing people who used free software – specifically, Linux. No evidence has ever been found to justify their claims, they of course lost badly in court, and now they are in Chapter 11 and facing oblivion. So, maybe that strategy won’t work any more.

Q: What else could you do to compete?

A: You could tell your customers that they will have no-one to sue if they use free software and it goes wrong for them. That’s true of course, but I can’t imagine suing a software giant and living to tell the tale either. Or you could say that you provide support which free software doesn’t have. That’s about the best argument of the lot, because it seems self-evident that you can’t get support for free. But there are a couple of problems with it. Firstly, you can buy support for quite a lot of free software. The State Services Commission negotiated a deal a few years back for government departments to get support for a particular flavour of Linux. Also, surprising though it might seem, there can be heroically good support available for free through what are called forums, which are basically websites full of people who just love to help. As an example, I was having a problem figuring how to get a problem on my blog resolved last year. At about 6pm on a Sunday night I posted to the WordPress support forum about it – WordPress is free software that runs my blog and millions of others – and within 2 hours someone had investigated the particular problem on my site and posted back exactly what I had to do to fix it. That’s what I mean by heroic support. It’s just not something you get from most regular software companies.

Q: Are there other reasons for people to buy software instead of using free software?

A: Perhaps you like having software that keeps checking up that you have a legal copy and disables your computer if it thinks you don’t! Don’t get me wrong – I am definitely not saying people should illegally copy software or use it in violation of its licence. If you want to use pay for software you should pay for it, and if you are using software for your business activities you shouldn’t be using pay software that was sold for education or non-commercial purposes only. What I am saying is, look for free software that they don’t care if you copy, that they positively want you to copy, and that naturally doesn’t try to check up on your rights to use it.

Another way that has been tried to prevent free software from getting a grip on the market is to try to prevent it working with pay software, or rather to make the ways of working with pay software obscure so that free software won’t interact with it. The effect of that is to make it very difficult for free software to get a toehold because it won’t cooperate with the mass of pay software that’s already out there. That’s been tried for a while but after some recent court cases it’s getting for companies to get away with.

Q: So how is this all going to turn out? There’s a lot of money invested in software companies, after all!

A: Yes, and some of them are going to have to change fairly radically. I don’t see how they can continue to defy gravity, frankly. There are some individual amazing success stories. There’s a Wellington company called Silverstripe, which makes a content management system – that’s a tool to build and operate websites, basically. Silverstripe software is powering the US Democratic party website at the moment, and a lot of others, so they are taken pretty seriously. And they have decided to make their software one source. That was brave, and looks like its paying off for them – they make their money from supporting it. Good on Silverstripe. Then there’s Wellington services company Catalyst IT – they have a successful expanding business based on providing IT services to other companies using free and open source software. And then there’s mighty IBM, which has become a huge user of – and investor in – free software, particularly Linux. Software companies which can’t figure out a way to make money in an environment where most software is free face going the same way as the Corona Typewriter company or the Polaroid Camera company.


As always, you can discuss this broadcast at

A source for Ubuntu CDs in New Zealand. Or, download here.

Competing with free, a piece I wrote a few weeks ago.

Two Wellington companies doing spectacularly well off open source.

posted by colin at 11:50 am  


  1. :-) Seems it’s the topic of the moment – nicely done

    Comment by Mike Riversdale — 22 May 2008 @ 3:04 pm

  2. I agree with Mike! Colin – well done – another cracking good expose on some of the best things money just can’t buy! Free software just goes better. Keep up the good work.


    Comment by Dave Lane — 22 May 2008 @ 10:22 pm

  3. I’m a little confused who is doing the Q and who is doing the A ?

    Comment by Brenda — 23 May 2008 @ 3:16 pm

  4. The interviewer (usually Kathryn Ryan) asks the questions. She doesn’t always use the questions I write for her, but then, I don’t usually stick too close to the notes myself. The notes are just a guide for the conversation and make something useful to put on the blog.


    Comment by colin — 23 May 2008 @ 3:21 pm

  5. Just a note that it’s not a simple matter to take a hard drive with Windows preinstalled on it and stick it in another machine–Windows is liable to throw a wobbly when it notices the hardware has changed. Not to mention that you’ll awaken the Product Activation gremlins.

    Windows doesn’t have the graceful hardware autodetection that is built into more modern operating systems.

    Comment by Lawrence D'Oliveiro — 27 May 2008 @ 9:25 pm

  6. Thank you for your post

    Comment by Computer Shop — 23 June 2009 @ 5:43 pm

  7. “Don’t get me wrong – I am definitely not saying people should illegally copy software or use it in violation of its licence.”

    But what is *ethically* (as opposed to *legally*) wrong with violating the license agreement? For example, if it says “you can’t make a backup” and you make one — which is NOT the same thing as giving away free copies to your friends by the way or posting the software on the net — how is that *ethically* wrong? Who have I *harmed* and how *gravely* by this action?

    Comment by mike3 — 26 August 2009 @ 12:36 pm

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