Daily Archives: February 13, 2012

What Does Free Really Cost? Part I

It seems we can’t go a day today without another FREE software solution being offered up for your business. But is it really free? What does it really cost your business to use it? The reality is that everything has a price, and the price for a business is typically a lot higher than the price for an individual. So what is the price? Good question. Let’s start with a recent research brief from ChainLink Research on From Free to Fee.

First of all, the move to ‘Free’ has redefined the definition of value in the digital age, which includes:

  • the value of audience
    visitors, opt-in subscribers, and the ability to mine consumer information
  • the value of the network
    a bigger, better network that matches yours
  • the value of the platform
    that is interoperable, and integrates, with yours
  • the value of human interactivity
    social and collaborative connections

Value that we expect to access for free through free conference services, file transfer, file storage, social networking, and even free ERP systems. Even in the enterprise world where we want to be using apps that millions of people use.

But nothing is free. Everything costs. Someone has to code the app. Someone has to maintain the app. Someone has to support the app and train the users. And that app has to run on hardware, which takes power, and be available over the internet, which takes connectivity. And people, power, and technology take money. And, for some apps, lots of it.

That’s why the big free apps, with enterprise uses, need conversions from free(mium) to paying subscribers. Hence the segmentation of features, basic access for free, more advanced features, like back-up, for money. Free may be a great way to enter the SMB marketplace, but it’s not a long-term strategy to stay there.

And it’s not just because it’s costly for the providers of the free solution, which have to pay their bills, but because it’s costly for the organization — something the article misses.

When an organization accepts Free, it accepts a number of costs that will be discussed in tomorrow’s post.