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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Impossible to compete with free software

I'm thinking of one day starting my own mISV and am looking around for ideas for a product(s). One thing I find striking is the abundance of free (either open source or freeware) solutions there are in so many different markets, including niches.

Some people say if you want to compete with free software you just have to make your paid for software a bit better. This isn't the case, if you want to compete against free your software has to be *vastly* better, even if you aren't charging much for it. There's a *huge* gap between say $20 and free. The gap in reality is much more than $20 (i.e much bigger than the gap between $20 software and $40 software).

So how do you guys successfully compete against all the free stuff out there and the fact that customers are being conditioned to think that all software should be free? Do you people think that open source software is killing small software companies?
Robin Send private email
Friday, March 06, 2009
 
 
I would disagree.  I am about to shell out some serious $$$ for Photoshop.  GIMP makes a good product, but I just prefer photoshop way more than gimp.  I find myself buying software more and more than to deal with some of the quirks of most free software.
Dan Hirsch Send private email
Friday, March 06, 2009
 
 
Whether you like it or not, free software (whether it's open-source or just freeware put out by a hobbyist) is part of the competitive landscape today. It's not "killing" small software companies, but it is a definite challenge.

There are several ways to deal with free software. One is to whine about it, which is what a lot of people on these boards do. A more constructive approach is to understand where your own product lies in the marketplace, and develop both your product and marketing strategy accordingly.

You can compete effectively with open-source software by marketing, marketing, marketing. Patrick McKenzie's blog at http://www.kalzumeus.com/ is all about software marketing. Patrick's product, by the way, has some free/open-source competition, but he earns good revenue from it--far more than I would have thought possible. Andy Brice is another developer who talks a lot about software marketing in his blog, http://successfulsoftware.net/. Andy's product is more of a niche product, harder for an OSS developer to clone, which probably does help his revenue--but he also markets his product extensively.

If you look at my website, you'll see that I target open-source users directly, and in fact my products have open-source competition. That probably does hurt my sales somewhat. But I do earn revenue from my products. Moreover, I use open-source as leverage in my own products: I use icons and code from open-source projects throughout my work . This reduces my development time and my overhead. In turn, I also make some of my code available as open-source libraries.

These are just a few examples to consider. There are plenty of others on this board. Being a successful indie developer is actually extremely hard. (My revenue is not yet enough to support  a full-time business by itself.)  I wish you luck!
Kevin Walzer Send private email
Friday, March 06, 2009
 
 
There is a ton of open source software projects out there, but only a handful of well-done and polished open source software projects.  The reason is the old 80-20 rule -- 80% of the work goes into that last 20% of the product (the 'fit and finish', polish, etc). 

Add to that customer support, documentation and a good website and you've gone beyond what a lot of coders would consider fun -- and thus put your product out of reach of all but the most dedicated open sourcers (and those that do go to that length very often charge _someone_ for their software).

Ultimately people want ease and stability, and they are _very_ often willing to pay for it.
Doug Send private email
Friday, March 06, 2009
 
 
I completely disagree. Open source software can perhaps contend with your $20 per app software houses, but in no does open source come close to competing with quality poprietary - it doesn't even come close.

I have never ever heard of a Photoshop user recommending Gimp. Or a Illustrator user recommending Inkscape...or for that matter a Maya / 3DS Max user recommending Blender. In my opinion the only 2 major applications that are successfully competing are Open Office and your various distributions of Linux.

There are of course, like I said, smaller open source application doing extremely well against paid for software, but they can't compete with your higher end software suites.

Just my 2 cents worth :)
Johannes du Plessis Send private email
Friday, March 06, 2009
 
 
Was just reading my post. The grammer is shocking :) Sorry about that! :)
Johannes du Plessis Send private email
Friday, March 06, 2009
 
 
I think what many people focus on are the different featuresets of the actual products, but that is not the only thing that can convince people to buy a product.

Customer service and good documentation can go a long way. I feel like its only within the techie community where they will opt for the open source solution and actually go through the trouble and dealing with the annoyances unofficially supported software. Theres also always a risk of open source projects going dead, which people would feel safer about by paying for a product
Benny Send private email
Friday, March 06, 2009
 
 
>but in no does open source come close to competing with quality
>poprietary - it doesn't even come close.
Apache, MySQL, PostgreSQL, Tex, gcc, emacs, QT ?

Too many uISVs try and launch developer tools, since thats what you as a developer are familiar with.  You are not going to release a $20 editor that replaces emacs on Unix!

This is the same conversation we were having 15-20years ago when MS included a mouse in DOS, or an undelete command or a file browser. Norton were complaining that they couldn't compete with things included free in the OS.
Martin Send private email
Friday, March 06, 2009
 
 
Very simple: most of audience for free software are geeks who like to tweak stuff. That leaves about 90% of the rest of the world out.

If you design an application that is easy to use and fulfills a niche, you don't have anything to fear from free software.

It would be hard to compete against major enterprise products like MySql for instance. But if you think of a small travel agency, they need software that Open Source doesn't provide. There are so many smaller markets that need good software.
Alain Raynaud Send private email
Friday, March 06, 2009
 
 
Sorry that came over a bit 'flame-y'
FOSS competition isn't a problem for a lot of sucessful uISVs - because they choose niche product areas with no real competition. There might be a FOSS table planner but it isn't going to have the same community behind it as Python or Apache to make it really polished.

The mistake people make is to build tools, eg. a bug-tracker or source control app that are aimed at a market that are aware of FOSS and there are contributers to those FOSS projects.
It's a little unfortunate the poster boys for this area are building precisely the 'wrong' apps - it just happens that there is room for one commercial offering.
Martin Send private email
Friday, March 06, 2009
 
 
With a few exceptions, open source software has poor usability, a bad setup/install experience, incomprehensible or non-existent documentation. In many, many categories, if the proprietary software is easier to setup and use, that alone justifies the price for most businesses. Almost all FogBugz customers are well aware of Bugzilla (a substantial percentage of them are upgrading from Bugzilla) and that hasn't hurt our ability to compete.
Joel Spolsky Send private email
Friday, March 06, 2009
 
 
Everything Joel says about the technical deficiencies of much OSS is true.  The non-technical deficiencies are even bigger, for the vast, vast majority of projects.  (Firefox, Linux, and developer tools/web stacks/etc are in leagues of their own.)

1)  The developers rarely speak the language of the target customer.  Actual text of an OSS competitor of mine: "GPL bingo card printing program (numeric, letter bingo and picture bingo). Also prints a calling sequence (equivalent to the output from a barrel full of balls). XML output for later linking to multimedia engine."

GPL, XML, and "mutltimedia engine" might as well be Chinese to my customers.  Meanwhile it doesn't answer my customers' core question which is, I kid you not, "Is every card going to be different?"

2)  No marketing aside from "Hey, its free, knock yourselves out".  There is no person who gets up in the morning and says "OK, how am I going to get this software in front of the people it can help today?"

3)  The websites are typically not designed to convert.  A user who hits them is unlikely to walk away with their need satisfied, even if the program is capable of satisfying it. 

4)  The experience of having a problem with an OSS product, if you are not a developer, is akin to a scene out of Kafka.  You've done nothing wrong but the world stops making sense and everything makes fun of you for it.

I think I'll write an article on this topic this weekend.
Patrick McKenzie (Bingo Card Creator) Send private email
Friday, March 06, 2009
 
 
I guess there are some open source products with user friendly features (like installation, user interface etc..) comparable to paid products and adding one more product may not be economically justified. A case in point would be Content Management Systems. But again why compete when you can provide paid services for existing Open Source products. There are several independent web developers making money to create CMS websites for small clients and they just charge for the design, configuration and installation. And then there are some companies which sell add-ons for these CMS products.
Nitin Vartak Send private email
Friday, March 06, 2009
 
 
I have personally been buying a lot of software lately to solve my problems.

For example, converting video formats.

I spent way too much time downloading, installing, configuring, and beating my head against the wall to get various freeware software to work and solve my problems exactly as I needed.

Finally, I purchased Premiere Elements so and I can basically do whatever I need to do with video.

If I were still back in college, the "process" of making freeware work would have been the fun part.  Converting the video was gravy.

But now I'm in business, and time is money, and I just don't have time to explore anymore - even though this is part of what made me fall in love with computers to begin with.

I remember spending days setting up Slackware linux boxes in my bedroom as a kid or in my dorm room at college.  Would I do that anymore? NO.  I want Windows to install and work on my new PC so I can get back to work again.

I think that "customers" will pay for software or they aren't "customers", they are hobbyists that still have time to mess with FOSS apps.  (Or maybe they are IT guys who are lucky enough to get paid to find the cheapest solutions for their company and get to mess with FOSS all day - luck ducks).
Ben Mc Send private email
Friday, March 06, 2009
 
 
Another hurdle at some companies is the IT department.  At some companies, especially with small, niche products, the IT department is more likely to approve of installing something from a company with support than something "free" that the IT department has to support on their own.
Ryan Wilson Send private email
Friday, March 06, 2009
 
 
Things change - back in the Slackware days I spent a weekend rearranging config.sys statements to get Autocad and an HPGL driver to both fit in memory on DOS.
Recently I spent a day trying to add username/passwords to IIS for non-local users - in the end I gave up and installed Apache.

You can compete with FOSS in the same way that you can compete with MS - by offering a product that does what the user wants and making it so they can do use it.
Martin Send private email
Friday, March 06, 2009
 
 
Martin, IISPassword does that. http://www.iistools.com/. It used to be free. Now I think it's for pay only for the full thing.

You're not the only one to have that issue :-)
Bart Park Send private email
Friday, March 06, 2009
 
 
So, I'm coming at this from the other side... I will only use free software, but I regular donate money to projects that I use regularly.

I haven't used Windows for a number of years now, but I always found the setup/installation part of most proprietary software on Windows pretty frustrating, and is certainly akin to the days when physical boxed copies of products were the norm... these days, most things are downloaded, but Windows still seems to lack a decent packaging format... even MSI seems to be woefully under-used and doesn't do half of what a .deb or .rpm file can do on a system running GNU/Linux.

Joel: Having used and set up FogBugz on GNU/Linux in the past, I'd say it's far trickier to set up than it needs to be... provide repositories for your customers, so Debian customers can just apt-get install fogbugz for example.

Sure, there are some usability problems with a lot of free software applications, but the ones I tend to use day-to-day... Firefox, Thunderbird, GIMP, Inkscape, Pidgin, GNU Emacs, etc are well tested and used by a lot of people for a lot of real work.

We've still got a long way to go, and I hope that independent software developers find a way exist and provide services around free software, so that selling proprietary software doesn't need to be the model for small businesses who want to make great software.
Matt Lee Send private email
Friday, March 06, 2009
 
 
> Some people say if you want to compete with free software you just have to make your paid for software a bit better.

To compete with free software you just have to stay motivated, and that's where the money from your customers come into play.
Hanzo Send private email
Friday, March 06, 2009
 
 
Well. I think most of things are already said.....I would focus on 2 ideas (being myself a guy using and developing open source for lot of years):

1. The customer support, to small markets or niches, is a major difference. The common computer user, not the geek, need help and support and on such topics I think the MicroISV can make a difference. We are launching now a product (see the link on my signature) that have a big open source competitor, but....we started selling with the Spanish version and would try to make the same (or hopefully better) with the English version.

2. The whole thing, the 20% commented before, starting with marketing and ending with excellent support, showing the customers we are here to stay creates confidence and lot of times the customer is happy to pay by such feeling (that someone take care of the product and their needs).

Myself, as Smalltalk programmer, used lot of times Squeak (an open source smalltalk) but I payed by Dolphin Smalltalk to build the windows software I'm selling as a MicroISV.
Germán Arduino Send private email
Friday, March 06, 2009
 
 
You're thinking at the wrong level. You potential customers don't want software. They want to do what the software lets them do. So in Patrick's case, they want bingo cards.

If your plan is "I want to write software" you don't have a plan yet. If your plan is "I want to help people set up their own online storefront" then you have the makings of a plan.

What is it you want to help people do? Don't use the word "application" in your answer.

Solve someone's problem, and they don't care if it was your software or a team of virtual assistants writing dynamic web pages on the fly. Don't talk technology. Address their needs. Solve their problem. Do that and you're not competing against free technology.
Drew Kime Send private email
Friday, March 06, 2009
 
 
I haven't read the entire discussion, but I did search the page real quick to be sure this specific example hasn't been raised.

To the person or people who mention that open source doesn't market very well, they are learning. GNOME Do[1] is one example of a good Linux application site in my opinion. It would be better if they had their own domain name instead of a subdomain, but it's still a sign of increasing quality, hopefully.

That said, the main creator of the program switched over from the Mac world, so that might account for it to some degree.

[1] http://do.davebsd.com/
Dennis Fisher Send private email
Friday, March 06, 2009
 
 
I've been reviewing TeamCity by JetBrains, a continuous integration server.  It's quite impressive on how easy it is to configure and use, however the Enterprise version costs $2,000.

I've also been asked to look at CruiseControl.  It's free, which is nice, but the thought of having to configure it by modifying XML files is a huge turn off and one that would certainly impede it's adoption here.

IMO, TeamCity is easily worth the money (from what I've seen thus far) and hope that I can convince management to purchase it.
Michael Bacarella Send private email
Friday, March 06, 2009
 
 
CruiseControl isn't that hard to set up and once you get one build running, the rest are really easy.

It sounds like you'd pay for a CruiseControl addon or an application that lets you manage the XML files. No idea if one exists, but I would be surprised if it didn't. And it probably wouldn't cost two grand, either.
Bart Park Send private email
Friday, March 06, 2009
 
 
The Gnome Do example is very good. It's a really good program with a really good site. The very idea that free (as in freedom or free as in free-speech or, still, "free as in speech") software is built without any worry about who will use it is outdated - a software that's not used by many people does not evolve to match people's needs.

As a developer, by far, the greatest advantage I see in frameworks like Plone, Rails, Django or even Tomcat (despite me regarding Java as crude and primitive when compared to the other languages I use with the possible exception of C++) is that I can examine every aspect of their implementation and tweak and learn from it. I can solve my problems (and my clients') much more easily than I ever could with, say, C# or .net.

The list of high-quality free (as in freedom) software is extensive, but geared towards people like us - developers, mostly because it's written to solve our problems, not someone else's.

The best way to make money in any market is to embrace the market the way it is. Complaining is easy, but markets change naturally. In a couple years, it will be impossible to sell an enterprise relational database just because MySQL and PostgreSQL are already better in many aspects than most databases you can buy.  You should, instead, build your business around free software, predict where it's heading, perhaps start contributing to it in order to make it better suited to your needs and go for it.

Trying to compete with OpenOffice, Apache, Linux, PostgreSQL or Rails is futile, downright stupid. Microsoft does it only because they must keep dominating the desktop market in order to survive. If you are smaller than them, give up going against and start going with.

You will see the journey will be much more pleasant.
ricardo banffy Send private email
Friday, March 06, 2009
 
 
Impossible to compete with free software?
I don't think so.
What you should be doing is using it, not competing with it.
That's why free software is out there, is it not? :)
Dima Send private email
Friday, March 06, 2009
 
 
+1 Joel for a tech market.
+1 Alain for everyone else.

Newspapers are folding because the content is being given away free on the web. As the breadth of free application widens, I do wonder if a parallel can be drawn to software.
Nicholas Hebb Send private email
Friday, March 06, 2009
 
 
It is possible to compete with free.

There is value in being able to get support, and knowing that the software will keep up with OS updates.

Lets face it -- too much free software is well worth what you pay for it (nothing). 

Not to dis GPL, but many companies shy away from it. They don't understand it, don't want to mess with it. They would prefer to work the ip owner.

If your software does anything useful, most of your customers would just as soon pay you a fair price to stick around for awhile.

Here's another thought --- you could compete against free by adopting a creative biz model. You may also find a way to also be "free" on the front end, but then scale up your services and capabilities for a fee.
Darren L. Send private email
Friday, March 06, 2009
 
 
Bart,

I certainly need to do more research regarding CruiseControl and perhaps other continuous integration servers.  A UI plugin would help tremendously in my case.  I'll look around.

As a follow up, the point of my post was simply to give an example where an easy to use product and a UI can go a long way to making a product more appealing ... $2000 more appealing in this case.
Michael Bacarella Send private email
Saturday, March 07, 2009
 
 
> It sounds like you'd pay for a CruiseControl addon or an application that lets you manage the XML files. No idea if one exists, but I would be surprised if it didn't. And it probably wouldn't cost two grand, either.

We use CCNETConfig:

http://ccnetconfig.org/
Anna-Jayne Metcalfe Send private email
Saturday, March 07, 2009
 
 
Patrick McKenzie (Bingo Card Creator) Send private email
Saturday, March 07, 2009
 
 
One more thing, software pricing (as you have a marginal production cost of $0) is so flexible that if you price right, you can always be a better choice for the buyer.

$20 is not free. OK. But come on, it's very close. It's almost free, $20 is so close to nothing, you can waste it renting a (very cheap) tennis court or having (a very cheap) lunch.

The same, in another scale, applies to a B2B product. $500 is not free, OK. But if the software does something useful it will be payed without much hesitation.
Javier Send private email
Saturday, March 07, 2009
 
 
I'd advise charging more to compete with OSS rather than charging less.
Patrick McKenzie (Bingo Card Creator) Send private email
Saturday, March 07, 2009
 
 
Patrick,

By "right pricing" I mean not so cheap, not so expensive, I think neiher $5 nor $500 will be a right price for BCC, for example.

Regards
Javier Send private email
Saturday, March 07, 2009
 
 
>>$20 is not free. OK. But come on, it's very close. It's almost free

That's just it though, to many people free and $20 are oceans apart. I read a psychology article about this once. People actually make irrational decisions when faced with something being free. This usually involves (in a b2b case) ignoring ignoring certain opportunity costs involved with getting an inferior product for free.

An example of this (please bare in mind I'm not calling Linux inferior here, I'm writing this on a Ubuntu PC) is a company I used to work for giving all of it's employees linux PCs to save maybe $100 per employee per year on bulk purchasing XP/anti spyware/office software, then spending probably $200+ per empoyee per year in support because the employees didn't know how to use it / it didn't always do what they wanted.

>>I'd advise charging more to compete with OSS rather than charging less.

This sounds cleaver. I guess the people who aren't willing to pay for software just aren't ever going to pay, even if it just costs $20. The people who are looking to pay aren't going to compare your products price to that of a free product so you don't have to try an make it just a little bit more expensive than free.

Also if people are willing to pay for something rather than use a free alternative it is probably because they are concerned with quality. A higher price tag communicates higher quality to customers.

Being a web developer I have come into contact with a lot of wannabe entrepreneur types. Often their business plans consist of offering an existing product in an established market for less money than their well established competitors. They often do this without finding a way to decrease the cost of producing their product / service compared to their competitors, so in other words are just willing to make less money for doing the same thing (or they haven't correctly determined what their costs will be). This people always seem to fail.
Robin Send private email
Sunday, March 08, 2009
 
 
@Robin,

I understand your point, and Patrick's also. I agree with you both on the main.

"A higher price tag communicates higher quality to customers."

To certain exent, that is true. I think that that $30 - $40 range is perceived like a "right and fair" price for quality B2C software sold via the internet.

If you sell at $10, your product will be perceived as "cheap" and your sales will go down. But I think that, for most of our products, if you rise the price above $60, sales (at least in volume) will go down.

Obviously, you can choose to be the Mercedes-Benz of your market, having a very high price and selling low volumes.
Javier Send private email
Sunday, March 08, 2009
 
 
>That's just it though, to many people free and $20 are oceans apart. I read a psychology article about this once. People actually make irrational decisions when faced with something being free. This usually involves (in a b2b case) ignoring ignoring certain opportunity costs involved with getting an inferior product for free.<
I couldn't have said it better myself.  My background (for the past 30 years) is in sales and marketing (university degree, experience in retail and commercial worlds) and people do not make rational buying decisions.  We all fool ourselves and pretend that our emotions don't control our decision making, but that doesn't change the way we act.
RGlasel Send private email
Sunday, March 08, 2009
 
 
Why not treat them as lower-priced competition?
Worklog Assistant Send private email
Sunday, March 08, 2009
 
 
Why is Coca Cola the largest selling cola brand in the world, even though you can generally buy generic store-brand no-label cola for much lower price?  Most people will fail to identify the different products in a blind-taste test (I know I would).

The reason is marketing and distribution.  Coca Cola spends a fortune on marketing and branding, and they have an army of distributors so that every time you're confronted with a drinks fridge it has the coca-cola brand name on the top, and is half full of their product.

The same principle applies to software : to compete with a free alternative, you just have to make sure your marketing is better, your SEO is better and your distribution and service is better.  In the end most of us are not as price sensitive as we would like to think we are.  And don't forget that for business software, most of the time to person making the purchase is not spending their own money: ergo, they don't care.  They want the product that makes them appear to be good at selecting software, which is not the same as paying the cheapest price.

I see the same old 'but apache/linux/firefox/mysql' arguments appearing over and over again.  I agree these are all excellent and succesful products.  The universe of software is much larger than a couple of operating systems, web servers, browsers and database platforms.  Building operating systems and database servers is fun and builds credibility amongst your peers : that's why the talent is attracted to those OSS projects.  The rest of the software universe is generally not as much fun, so the 80/20 rule strikes : 80% of the OSS offerings attract very little support and suffer as a result.
Bruce Chapman Send private email
Sunday, March 08, 2009
 
 
@Bruce
I generally agree with what you said, but to compete with "free" products, you need to have a product that is perceived as being different enough to not be in competition with the free product.  It's more than just a semantic difference.  This is the core of "product branding" that marketers like to talk about.  You don't compete, you differentiate.

By the way, I'm not so sure about distribution being the difference between Coke and Pepsi.  In my neck of the woods, Pepsi distributors are more aggressive at the convenience store level, yet Coke outsells Pepsi in those stores by a wide margin.  For whatever reason, Coke is considered an adult beverage and Pepsi isn't.  When I go into a convenience store, it certainly isn't more difficult to buy Pepsi, and the price is the same, so if Coke is outselling Pepsi, it's because of branding or product differentiation.
RGlasel Send private email
Monday, March 09, 2009
 
 

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