Daily Archives: February 14, 2012

What Does Free Really Cost? Part II

In our last post we discussed how we can’t go a day without another FREE software solution being offered to our business and that we don’t believe these offers because everything has a price, even if it’s not immediately obvious or we are not the ones to (initially) pay it. Referencing a recent piece on From Free to Fee from ChainLink research which discussed how the definition of value has been redefined in the digital age, we discussed what people now expect for Free and why these expectations are not always in line with reality because someone has to code the app, someone has to maintain the app, and someone has to support and train the users on the app, and that someone will expect to be paid to do these tasks. Also, the app has to run on hardware, which takes power, and be available over the internet, which takes connectivity, and all this takes money. We concluded that using a Free app has a number of costs, and that they warranted a discussion.

So what costs is an organization accepting when it chooses a Free app?

  • Platform Limitations
    All free(mium) platforms have limitations. The best things in life may be free, but the best things in enterprise platforms are not. You’ll be paying for all the inefficiency in your organization.
  • Data Loss Risk
    No money, no guarantees. If your files are lost, and you’re not paying for backup, they’re lost forever. And even if you’re paying, and you’re not using a quality service with off-site backup, you could be in the same boat as the MegaUpload users. You’ll pay dearly when your data goes up in smoke.
  • Service Loss Risk
    Again, no money, no guarantees. The service could be here today, gone tomorrow, and with no escrow, you’re out of service. You’ll pay dearly when you have to scramble for a new service provider.
  • Supplementary Platform Limitations
    The free service may only work will files in a certain format, may only work in IE on Windows, etc. You could be locking in your platform requirements to those that are not the best for your organization. And then when the number of vendors who can provide that platform diminish to few, or one, you’ll be reaped over the coals at upgrade time.
  • Vendor Lock Ins
    Let’s say you managed to negotiate a FREE license to a piece of enterprise software to support your organization in exchange for a big services spend or marketing consideration. This may save millions of dollars in licensing costs, but if that software only works on top of a certain ERP system also provided by the vendor, the vendor has you over a barrel and will more than make up the loss on the Free license to the specialty module with the premium you’ll be forced to pay on the base ERP. And this is true across IT systems. The not-so-bright negotiators at a big University who recently negotiated Free Cloud-based Microsoft Exchange mail didn’t save 2 Million over X years, they locked in probably 10 Million of spend on Microsoft Operating Systems, Office Packages, and Back Office Suites over the next X years as Exchange only integrates fully with other Microsoft products. And how much of a break are they going to get on these products when Microsoft just gave them mail for Free which is, sadly, a service that is already almost Free if you decide to go with something like Pronto on Linux (as your only cost is the cloud computing platform and internet connectivity).

And these are just the obvious costs. There’s no Free lunch in enterprise software or supply management. You always pay in the end. And, if you’re not careful, you’ll pay much more than you save by choosing a Free platform. Remember that, and pay up front, and you’ll avoid rude, costly, awakenings when something goes terribly wrong.