'Free' may be losing its allure

Open-source vendors are under a barrage of competition from free-but-proprietary vendors and need to figure out new ways to improve the software experience.

There's a range of great chatter on the Web recently that has direct implications for open-source business models, all of it related to the value a vendor derives from "free" as in cost.

First, Plenty of Fish writes that it's on the lookout for a model to replace its famous $10 million-model built on Google Adwords:

The problem with free is that every time you double the size of your database the cost of maintaining the site grows sixfold. I really underestimated how much resources it would take, I have one database table now that exceeds 3 billion records. The bigger you get as a free site, the less money you make per visit and the more it costs to service a visit...There is really no money in being free and we have to start experimenting with other models now or we won't be able to compete in 3 or 4 years.

That's the Web world, where the cost of distribution (and support? Who thinks about support in this sort of business??) is free. What about open source?

Well, The 451 Group's Jay Lyman writes an excellent analysis of a rising threat to open-source software: free-but-proprietary software.

An emerging and ongoing trend that should be a concern to open source software vendors is the use of free versions, SaaS, easy deployment and credit card payment for easier access and low-friction sales by non-open source competitors. Proprietary vendors are finding that they can match, or at least come close to matching, the availability, cost and convenience that have typically been associated with open source software. If the open source players are not careful, they may be on the losing end of the same kind of disruption that characterized their own success.

Oracle and others have tried this before, to little avail. Source really does matter, even to companies that aren't interested in modifying or viewing it.

But that's a short-term advantage. Microsoft and others are figuring out ways to make code visible, if not modifiable, to customers. Open source can't stand still. We need to innovate, particularly in making our software easier to deploy and use. Stasis equals extinction.