Apple surprised us all by making OS X and their iLife and iWork suites of software free last week. But what does such a move do to the rest of the industry?
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The problem with free software

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Here we are a week after Apple announced that most of their consumer software is going free, and much has been said about it. Do I think that giving away software is a bad move for Apple? No, it helps them sell hardware. However, I’m afraid that it may devalue the efforts of third-part developers. That is, people with glittery iPhone cases, chihuahua in purses and no appreciation for the work that goes into software, may rankle at the idea of paying for any software once enough of the big guys start giving it away for free.

The counter argument may be right in front of us in the form of Google’s free web-based software. Granted, these are not native apps (mostly), but they are certainly free, used by many, and really haven’t undermined the paid app market. Not from what most consumers and even developers can tell anyway.

Apple makes their money selling hardware, Google makes their money selling your attention (in the form of ads). Microsoft, for all their faults, makes money the old fashioned way—selling licenses to software. This I think, is coming to an end, or so it would seem. Windows, the technology that Microsoft is built on, is preparing to see the bottom drop out of it. Mobile computing is eating them alive and they are feeling the squeeze from Apple and Google from both sides. This is why Ballmer is out.

This is also why you see the likes of Microsoft, in regards to Office 365 and Adobe with their Creative Cloud suite, moving to subscription services. Lower cost of entry and recurring revenue. That seems to be the only way, at least in the near term, and in the consumer market, to make money off of software.

As a side note, we all thought it was odd that Apple didn’t just give away their iWork and iLife software to everyone. I think they wanted to, but couldn’t due to accounting. Remember those strange days when Apple gave away iOS for free to iPhone customers, but iPod touch customers had to pay? The same accounting problems they had then, are the same that they are facing now with the iWork and iLife suites. So to make it work, and lord knows I don’t understand the intricacies of corporate accounting, they have to give away the software with new hardware purchases. Sure, the added benefit, is that anyone that wants the software on hardware they already own, will have to buy it. Then again, I think the amount of money Apple makes from their software could be described as a rounding error on their overall revenue. That is to say, a tiny sliver of everything they bring in.

In summary, the industry is heavily trending toward free software with a hardware purchase. For consumers, this is great. I just fear that developers, big and small, but mostly small, will have trouble eking out a living selling software to consumers. I think it is fantastic that the likes of Agilebits charge the unheard of price $17.99 for their 1Password app in the iOS app store. They think their software is valuable, and are charging accordingly. We need a few more app makers to continue this trend. Free is nice, but it needs to be sustainable. Big guys can do that, it’s the little guys I’m worried about.

 

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  • Truffol

    It doesn’t matter if the developer is big or small. As long as their software adds value, irreplaceable, they will always have demand. All consumers weigh cost/benefit before every purchase, and in front of a great software that consumers actually need, they likely won’t go “hey look at how Apple gives away their software. Why don’t you do the same?” It’s Microsoft who should be worried right now!