Developing a Priceless Product: Free Software

In our free-market society, the price of something usually reflects it's value.  Charging what the market will bare has been the cornerstone of success for many market leaders of the 19th and 20th centuries, giving rise to the history of 'cornering the market' and the invention of  the first (and real) game of monopoly.  This value/price relationship was there at the founding of the Software industry and served that industry well through most of it's life.  But it's time for a change. 

I firmly believe that today's Developers are the true creators of wealth in the Information Age.  It is the Software Developers, the Website Developers and the Web Entrepreneurs (e-Business Developers) that are designing and building the new e-World we will all come to populate.  It is these heroes that are creating our future. Just like the settlers created thriving societies out of worthless prairies, these 21st century settlers apply generous doses of personal ingenuity, perseverance, and hard work to harvest a valuable crop from a virtual landscape.  It is the e-Developers that fill the niche in this world that the Industrialists filled during the creation of the Industrial Revolution.  So I'm definitely not saying that software is worthless!

What I am saying is that the time for creating and selling software product is over.  The product, devoid of the services supporting it, is virtually worthless.  Certainly anyone who views an IT budget, reads news on 'outsourcing' or the Open Source movement (Linux, GNU, etc.) or ASPs (Application Service Providers) knows that software service is the value center of the industry today. 

It's time to recognize that the product model simply doesn't fit reality in today's software market. As described in the previous article, software simply rots. It is not the stable, tangible element at the center of the business.  The software itself is NOT the key marketable element. Linux source is free for more than one reason!  Zero is close to the proper valuation for software when amortized over millions of users, and this is especially true of software based on designs that went public years ago.... Support (in it's many forms) is the real profit driver in the software industry today. Hence it is much more appropriate to view the future of the software industry as a SERVICE, not a PRODUCT industry.

What do you value in software?  See if you agree with my list.  I want software that....

• is as close to trouble-free as possible, and when flawed, fixed fast and for free
• matches the way I think and work, requiring minimal or no relearning
• will be around for the long haul by evolving to meet future trends
• can be trusted with personal and corporate information

In the past, the focus on satisfying these objectives was concentrated on the design of the programs.  Value was centered in the work-product of the interface designer and the architecture and engineering of the software.  Questions of structure, data-flow, efficiency, data integrity, format, etc. dominated the analysis.  The focus was on the 'product' itself.

In the present, we find ourselves in a rich and growing net of powerful tools and services.  Though the old product-centric values are still important, they are swamped in the value equation by questions of interoperability, trustworthiness, management of change, etc.  The key to which is providing support for evolving our workplace to deal with the rapidly changing networked world.  And clearly, providing this type of support is central to a service economy and business model.

Note that this is not a Microsoft verses Linux issue, nor does it fall along any of the other quasi-religious or political fault lines in our industry.  Proponents on each side can make arguments that their technology addresses these issues better than other technologies.  When these factions argue from product-specific prejudices, they are missing the point.... and possibly the future.

The true measure of value in the software industry at the start of the 21st century is in the management of change for the user:  support in the face of rapid technology evolution.  The vendor that defends their technology to the last will lose out to the vendor who adapts rapidly to user needs and supports change, including adopting competitor's ideas and standards.  Some examples from history and the news:

• good - vendors that proactively update their products over the Internet to fix flaws and adapt to new usage styles and add-on products, e.g. Windows Update, Oil Change, IBM Internet Update and similar services;
• bad - vendors that react to complaints that a user's PC crashed by telling the user to format their drives and restore the system from the system CD originally provided with the PC, then blames the recurrence of the problem on add-on software re-installed by the user when restoring his/her backups;
• good - recognizing you've made a mistake (or have competitors) and changing your designs and market strategy to correct, e.g. Microsoft's "conversion" to the Internet Religion, IBM's "invention" of the PC, Wine and similar technologies that allow Windows products to run on Linux and any of the many technologies that allow UNIX applications to run on NT;
• bad - Sun's suits against Java licensees essentially because they evolved Java technology faster than Sun, followed by Sun's recent withdrawal of Java from consideration to become an open, international standard;
• bad - vendors that deny choice by a) resisting the porting of third party software to their hardware (e.g. Sun's apparent resistance to supporting NT on their platforms), or b) force their software into a preferential position on other vendors hardware (e.g. some of Microsoft's alleged license deals with PC vendors.)

The implications of a shift in the software industry from product centric to service centric can be profound:  an end to browser, OS and similar "wars" as all vendors have less to lose by giving up on their software "product" and more to gain by providing the "services" customers really need;  a growing amortization of risk across multiple service providers as "source in the vault" becomes less a profit center for the vendor and more a share in a community resource;  much cheaper, interoperable and friendly software as the "not invented here" syndrome that infects proprietary owners gives way to broader, more democratic ownership.  And certainly, there is the potential for a more sane way of governing and pricing software, one that better fits the way e-Users actually operate. 

Here are my suggestions for new pricing rules for software:

1. software in binary form should be free for non-profit and personal use, unsupported but regularly updated, digitally signed to verify integrity, reliably tie the binary to the source, version number, and copyright rules;
2. commercial (for-profit) use should be on a subscription basis, proportional to usage, include access to the source-code and entitle the commercial licensee to a proportional share in the ownership of the software and a proportional vote in the future evolution of the product;
3. support should be available on a contract basis from commercial licenses who use their access to source-code to also provide independent assurance of the trustworthiness of the product and possibly insure against losses;
4. support licensees are expected to provide source-code bug fixes to the software owner (community of subscribers?), vote on the proper bug fixes to incorporate in the next update, and possibly earn an increased share in the ownership of  the software; 
5. developers can be any licensee that adds value to the product by contributing source adding features or improving performance, reliability, compatibility, etc. as determined by vote of the owners and community, resulting in the developer's increasing share in the ownership of the software.

In subsequent weeks I hope to evolve these ideas with you.  There is the potential here for a significant shift in the way the Software Industry is structured.  A shift that I think better matches the realities of the open marketplace in a free society.  A shift that provides a middle-ground among monopolistic software empires, liaise-fare GNU Open Source peasant revolutionaries and the legalistic, bureaucratic e-World some lawyers and legislators seem to be contemplating.

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