There can be a lot of heated talk generated when it comes to the pricing of software. From FOS advocates stating it should be free (for reasons that range from ethereal and absurd to downright Marxist), to software companies large and small, the media pundits and the consumer.
Very few however consider the basic tenets of what it means to survive, what a real company actually is and why profitability or lack thereof harms and devalues an entire industry.
A business is in many respects like the phrase sociologists use to describe the modern human family unit. The “Nuclear Family” – or if you’re name includes the initials GW then you’d transform that through metathesis to “Nucular Family.” 
Most aspiring mISV ’s in particular don’t appreciate this or even acknowledge it. One only has to look at the pricing models of most software downloadable from the Internet to get an inkling. Most of it is under the dreaded ceiling of $29. Most of it is aimed squarely at the home consumer, coined by some as “Clickware For the Masses”.
I’m not saying one should never price in this range, nor am I saying one should not write for B2C (Business to Consumer). But there is a fundamental reason why B2B (Business to Business) software development companies have higher profitability rates in general.
That profitability gives them stability and long term staying power that is not evidenced by most so called companies hammering out product and selling it below thirty bucks.
Now, at this juncture it’s only fair to state that much of the under thirty dollar crowd are neither programmers not business minded people. As always with generalizations there are going to be exceptions, maybe you the reader are one of them. But across the board we see more abandonware in this price range than anywhere else.
The reasons are varied and complex in many respects and there are more than a few. But it would be fair to say the most consistent reasons are under capitalization, no plan beyond turning $30 (I’m rounding out here – common price is $29.99 or – gulp - $19.99) a pop into the next Google and the sad fact that most programmers working in this price range as mISV ’s are not competent as programmers or business people.
A serious, often fatal deficit, arguably more devastating than under capitalization. Not that they couldn’t improve their skills, but most don’t and they don’t while arguing vehemently why they should not which, all things said and done, is incredibly lame.
Consider for example that User Interface design is an integral part of software development and most importantly of our marketing and repeat sales in many instances.
Most User Interfaces in this price range look like limping rejects from Windows 95. Rejects that were not even satisfactory under the Windows 95 environment frankly.
I’ve blogged here before that their choice of icons, or lack of choice, care over UI design issues, balance, contrast, colour, usability is virtually lacking in most instances. Near enough is not good enough. UI design is subjective to be sure – but the finer points of that argument are not under consideration in this article. Rather I’m referring to the absence of any consideration or even an attempt to get it right.
But the developers I’m speaking of tend to disagree. I have concluded they disagree because they are not selling a business to the world, but instead a forlorn hope that somehow they’ll luck it out with what under any other circumstances would be a product that violated basic merchantability and fitness let alone any rational attempt at aesthetics.
When software looks the way most of this crap looks the FOS crowd can crow and pronounce their FUD based dogma that “Software should be free”. I’m not even going to discuss here those folks suffering from the mental aberration that causes them to conclude and pronounce that “Software wants to be free” as there is no evidence for an electronic Gaia in any universe I’m aware of.
But then most FOS software – with exceptions like nix itself which frequently sports nice UI’s – looks even worse than the worst bottom feeding mISV ’s effort.
Software should not, by definition be free, though I have no problem with a person being, what I consider, short sighted enough to give away hours of work if they want to do so – but I reject with total contempt any politically motivated nonentity trying to make it compulsory – unless they’ve recently invented a social system where nobody works, everybody is well off and they themselves can demonstrate that they are managing to eat without having a day job, stealing or sponging off social welfare.
It’s not just UI either – it’s code, it’s scope, it’s market research it’s…
Well it’s all the things they tend to whine they can’t afford to do.
What we’ve done in this industry is manage to take an incredibly complex and disciplined process that takes massive amounts of time, effort, study and to some extent money (the best tools for productive development are rarely “free”) and tell everybody that “anybody can do it” leading to a stream of undisciplined underachievers looking for a fast buck.
We’ve told the consumer in no uncertain terms that our labor is worth very little by promoting product at a price that does not deliver economic sustainability.
It’s hard to find another industry or profession that has shot itself in the foot with so many projectiles.
We eulogize, fantasize and tremble over software piracy, hurling obscene amounts of money at products that all to often fail utterly to deliver the benefit they purport to supply. Yet we overlook if not dismiss in contempt the obvious suggestion that maybe we are not covering our shrinkage.
In bricks and mortar retail sales to consumers, in particular, prices charged factor in loss of product through damage and theft. How many mISV”s bother to factor in expenses let alone shrinkage?
Consider that the “marketing strategy” of most mISV ’s is deep discounting. Their entire USP (Unique Selling Point) is “I’m cheaper than XYZ established brand” even though in reality the product is rudimentary by comparison, if not technically inept and shallow. Even the ones who clone to the letter rarely offer any perceivable benefit – and rarely succeed as businesses – the obvious exceptions aside.
So What Price Is The Right Price?
Easy to answer actually. The one that delivers a sustainable business. Anything less than that is a total unadulterated waste of time and resources. It’s not the one that Joe Blow the consumer told you he’s prepared to pay necessarily either. People suggest pricing (high and low) based on many factors and you can bet those factors have nothing to do with commercial sustainability.
That’s not to say you don’t listen – clearly a product must be priced according to what the market can pay. But you must listen and be prepared for something that you might not like to hear or conclude and that is:
Maybe your product isn’t commercially viable at all?!
That’s pretty alarming I agree. But it doesn’t make it any less important, if anything it makes it pertinent and overriding. If it’s not possible to sell a product – any product – for the purposes of deriving sustainable, achievable income then there is no point whatsoever in ever writing a line of code for it unless your intended goal is to:
a) Make a loss and go out of business.
b) You’re happy to stick your head Ostrich like into a hole.
c) You are a masochist and enjoy the process of financial failure.
d) You’re a Richard Stallman convert and your intention is not to sell in the first place.
Where do your interests lay?
FOS Is Shafting Society – Not Merely ISV’s
Yep. Sad to say the implications of FOS go wider than socio political belief systems that somehow conclude, a point I’ve never been able to identify with, that commercial = Evil.
What the FOS crowd have managed to do is convince big business that using FOS is a really great idea. That has an impact on every economy. National economies, regional economies, employment economies and the often overlooked economies of scale whereby FREE tends to have the reverse effect of that which is intended and creates monopolies rather than eliminates them.
The whole model for paying for support not software has not materialized. All these companies embracing FOS have embraced FREE - nothing else. What this means is yet another series of twelve gauge, double rounds at automatic fire rates into our own collective foot.
The companies are abusing the concept, sure. The only message they got, predictably, was FREE. Nothing else. There’s no ethics under consideration here, no goodwill to men and no concept of free as in “beer” or free as in “air”.
Merely FREE.
You can’t blame them. Greed manifests in many forms and it’s only logical and predictable that this would occur. That the premise of FOS would be overlooked and exploited.
Yet with each new corporate FOS conquest the FOS crowd cheer like deluded inmates of a byte ensconced psychiatric ward.
It’s not sad – it’s absolutely pathetic. Given that many contributors to FOS – who contribute I believe for all the right and decent reasons in general – are corporate, cubicle style developers what they are doing is programming their own obsolescence.
But few see it or even consider it. I guess it’s more fun to be an economic anarchist on Slashdot than it is to consider the ramifications of playing with economic anarchy as a hobby.
Don’t agree? How much FOS have you donated to? And if you do – how much FOS is used by others you know and how much have they donated?
How this ties to commercial software pricing is literally this. We’ve always had free software, we’ve always had the bottom feeders too and their economic Sub-Antarctic pricing models, but now we’ve educated more people (big business in particular) that they can get it for nothing, that they should get it for nothing, that they have a God given right to get it for nothing.
This impacts even on the closed source free software, let alone the bottom feeders themselves in this industry. They too become maligned for not releasing source and not releasing the whole shebang for free.
They too are criticized broadly and harshly for being bloated capitalistic fat cats when in reality they are struggling to make ends meet and put bread in their children’s mouths.
It’s not just software either – it’s music too. Independently releasing musicians are tarred with the same brush by many as that of the mega record companies. When in reality all they are doing is performing fee for service. We’re telling people that right brained people and their creative output are worth less than those, the majority who couldn’t even begin to understand, implement and indeed invest the requirements for that output.
What’s right with that?
I’ve firmly come to the conclusion we have to draw a line in the sand as mISV ’s and ISV’s. Advertising supported software is gutted every rotation of the economic clock, so there’s no long term model there. The first victim of a recession is advertising. The second victim is the deep discounter. Marry this with a rabid belief that a type of human output should be free to suit a misguided theory based in economic misogyny and we have a recipe for a lot of pain for our sector.
To draw that line, particularly in the increasingly rare instances where you are the first or among the first players in a market, we need to price with profitability, with commercial viability in mind.
Prices can always be adjusted down as needed, but it’s a hell of a lot harder to price up. Particularly in this sector – though it doesn’t seem to be to difficult for the oil industry to achieve…
Which brings me to the final point of consideration. Our pricing structure has not kept pace with the cost of living. We’re still trying, in way to many instances, to sell at a price scale that we were using pre dot com bust if not pre Internet era.
We need to factor this. Few mISV ’s are in a market segment, especially the sharply peaking verticals, that allow them to enjoy the kind of turnover mass markets – and by consequence higher profits – enjoy. Very few indeed. Costs are incremental. More downloads, more credit card processing and other costs manifest as higher fees when we aim for high turnover of product. Scatter gun sales are not going to work in these markets – can not work – and we need to have the intestinal fortitude to understand it and price accordingly.
Fewer sales more profit is not the oxymoron business newbie’s think it is.
If it scares you then maybe it’s time to address your fears and quit hiding from your own reflection?
Scott Kane
Quote of the day:
He was a genius - that is to say, a man who does superlatively and without obvious effort something that most people cannot do by the uttermost exertion of their abilities. - Robertson Davies
(Hint – Robertson Davies wasn’t talking about people advocating FOS).
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