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'Free' is the new 'cheap' for software tools

The release of IBM's free DB2 database points to the downward price pressure from open-source programmers' tools.

James Gosling, a vice president and fellow at Sun Microsystems, once quipped that the average software developer spends more on cafe lattes than on tools.

Two years after Gosling deadpanned that one-liner, software developers appear to have even more spare change to feed their caffeine habits.

Free entry-level products are rapidly become de rigueur in many areas of software, notably in programming tools where there are hundreds of thousands of freely available goods.

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What's new:
IBM released a free version of its DB2 database on Monday, following similar moves by the other two major corporate database providers, Oracle and Microsoft.

Bottom line:
Viable open-source products are prompting established vendors to introduce free entry-level products, particularly in the field of programming tools.

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On Monday, IBM introduced DB2 Express-C, a free database aimed squarely at software developers. It is a trimmed-down version of its commercial product, and IBM limits its deployment to two-processor servers.

Oracle and Microsoft also recently introduced free versions, joining a number of existing open-source databases, such as MySQL and PostgreSQL, that can be freely downloaded.

The moves by the big three corporate database providers--Oracle, IBM and Microsoft--reflect some of the changing economics of the software business, where freely available open-source products are forcing established vendors to adjust the way they do business, analysts and software industry executives said.

"Commercial vendors competing in areas where there are credible, free open-source alternatives are increasingly being pressured to lower the barriers to entry to their product," said Stephen O'Grady, an analyst at RedMonk.

That's true for many programming-related software applications, including database servers--the underpinning of corporate applications that can fetch high prices, according to analysts and industry executives. But having a free item on a company's product list can makes good business sense, software company executives argue.

By releasing a free version of their database, IBM, Oracle and Microsoft are trying to lure developers away from open-source alternatives and toward their own products, executives said. In addition, these companies can potentially expand their base of customers.

"The open-source and free database-server providers have done the industry a service by demonstrating that there's a broad opportunity out there, among developers and solution providers that hadn't been taking advantage of a database server because of cost," said Bernie Spang, director of data servers at IBM.

Spang said that the free version of DB2 will foster growth of applications built on top of that database. IBM benefits when it sells higher-end versions. Also, a free product can entice third-party software companies or consultants to standardize application development on IBM's entire line of infrastructure software, including the database, application server and other components.

Developer mindshare

Analysts said that it's still unclear whether these free database versions from the three biggest providers will feed the companies' top line.

But IBM, Microsoft and Oracle need to have free offerings purely for defensive reasons, Forrester Research analyst Noel Yuhanna said.

"The whole notion is to develop the community and to grow the adoption. (Free databases) is one way to stop the open-source database adoption--it's not really going to generate revenue per se," Yuhanna said.

"The real battle here isn't revenue, it's developer mindshare."
--RedMonk analyst Stephen O'Grady

Forrester estimates that the open-source database market, which includes support, service and license revenue, was about $300 million last year and will grow to $1 billion by 2008. Demand is being driven in large part by lower costs and maturing products, said Yuhanna, who predicts that 20 percent of "mission-critical," or essential, corporate applications will run on open-source databases by the end of the year.

Freely available software has been around for some time. But free products, which encourage developers to try out software, combined with open-source communities around those products, can be very compelling for a software company, noted RedMonk's O'Grady.

Open-source communities tend to spawn the creation of add-on products, such as plug-ins to a browser. They also foster the usage of open-source components in a certain combination, such as LAMP (Linux, Apache, MySQL and Perl, Python or PHP), he said.

"The real battle here isn't revenue, it's developer mindshare," O'Grady said. "By leveraging open source, (open-source database provider) MySQL and others have been phenomenally successful at capturing developer mindshare."

The prices for development tools, which are often used in tandem with databases, have shrunk down toward zero, as well. The popularity of Eclipse, an open-source framework, has made it difficult to charge for a basic integrated development environment (IDE), analysts have said.

Last November, Sun Microsystems made all of its development tools free to programmers who sign up for a yearly subscription to the company's developer network. And Borland Software, which traditionally focused on selling IDEs, has revamped its strategy over the past three years to selling suites of lifecycle tools that address testing, modeling and coding.

In another example, Adobe Systems on Wednesday is expected to revamp the pricing for its Flex Flash development tools.

The first version of its Flex tool set was about $15,000, but the price was throttling its adoption, said Jeff Whatcott, senior director of product marketing at Adobe's enterprise and developer business unit.

"The goal is to get to a million developers building rich Internet applications," said Whatcott. "To do that, you need a good product line. But you also need a licensing model that supports viral, development-to-development marketing. That doesn't happen with a $15,000 product."

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