You are right that it’s about what people “expect” from the software. For example, if they expect to be able to reach customer support to help them with their problems, they will probably have to pay for it.

Also, I think most people misunderstand the concept that marginal cost of production of software is 0 (and i am the last person to say this because I dropped out of intro to microecon in college ), what it really means is that marginal cost of distribution is 0. So compare to other products, you can consider it 0 to have that other person get your software distribution. However, everything else costs money – from server bandwidth, disk space, to customer support, upgrades and fixes.

But yeah, it really depends on what people are expecting from the software and what the software claims to achieve. For example, RSS/Emails could be charged if they were used by an organization (and had a lot of collaboration features), but could be free if some individuals wanted to use them.

At the end of the day, some people would like their software to be FREE and will become Richard Stallman or Linus and others would want to charge people for it and they’ll become Bill Gates or Lawrence Ellison, or they may still become Lary Page and Sergey Bin or Pierre Omidyar if they can manage to extract a lot of cash from somewhere in the user base (advertisers, users, buyers, sellers, etc.etc.).

By the way, there is no harm in starting FLAME wars every once in a while, it spices up the post

It depends how mentioned things are being used. Email and RSS are used as technologies rather product. If some system is fetch data from external/any system in RSS format and charging money then it wouldn’t be some unfair with the users.

I was actually trying to get some clarfication from Jaywalker because a lot of people write about marginal production costs of software, not just Jay.

Obaid: Microsoft is making a lot of money because MS products are cheaper than FREE open-source products. How do I figure that? TCO.

Anyway, as I said all of these things are COSTS, but they have nothign to do with whether or not software should be CHARGED for.

The charge or not charge question depends on what people / your customers expect to happen.

You cannot charge for a commoditized good no matter how much better it is or how long it took you to make it.

Similarly, you cannot charge for something that inherently only adds entertainment value (myspace and other social networks).

You cannot charge for software that is considered essential — e.g. Email / RSS readers — they’re not premium products anymore.

Generally, you only charge for something that people think they are obtaining at a premium. A lot of people do not consider software to come at a premium, because the general perception is that someone else will copy it and offer it for free soon.

I’ll agree with Osama (these days I am agreeing too much with you, aren’t I?:) and Obaid … so here are my 2 cents:

1. The cost for reproducing a piece of software is virtually 0 (if you ignore the associated media cost). In this regard, software is only similar to some creative works like music.

> Have you ever distributed software? How much does it cost to distribute software over internet? How do you support customer queries? What happens when people want guarantees for the software, and when your software is used by 2, 10, 20, 30, 300, 3000, 300000 people? Software is FAR from music. I’ve worked on medical software, and believe me you have to have a certain quality to get approval from FDA, and have HIPAA compliance etc. It’s not something you produce and forget about and hope that people would either be your fans and listen to you or just leave you alone.

2. The amount of effort required + the overall quality depends enormously on the person who is carrying out the work. This makes software different from any other “laborious” work.

> Do you think products are basecamp, facebook, myspace, youtube, or our very own iscrybe etc., are created by ‘one’ person? What happens when 2 persons collaborate on a software? They require communication, a common repository etc. what happens when the software has exceeded 5000 lines and modules are changes often? How do you cater for multiple versions?
3. You can work from the comfort of your home. No other industry would dare doing that.

4. You can showcase, buy, sell and collaborate just using the Internet. Here, it’s different even from music where “jamming sessions” are almost mandatory.

> Firstly, you mentioned “buy, sell”, you probably mean distribute and exchange (just for the sake of argument). Secondly, I dont really know how to respond to the comparison between software distribution and jamming sessions

5. Students are the cheapest resources are available. Many of them can produce high quality work just in their desire to learn more.

> You really think students can create windows vista,XP, 2000, 98 … ? Office 2007? Basecamp etc etc..?

6. The only “tangible equipment” needed for producing your masterpiece is a PC and an Internet connection.

> a PC isn’t always bought by dads, and internet connection costs money as well. My company pays A LOT for our internet connection, back-up connections etc – not to mention quite a few companies have invested a lot in providing us with big pipes so they probably wanna recover their costs as well, and since we have to pay them to do our work we wanna recover our costs, and hence you gotta pay for the software that we (i.e. the software engineers) do for you. Yes some people like to do free software but I am afraid, you gotta charge for something, software or support or lots of ads…

Now, there are different ways to generate revenue. And software is very unique in that sense. You can have different models: charge your user, advertiser, etc… its like a free news magazine where 60% of the content is just advertisement.. or paid news magazine where 30% of the content is advertisements

its all relative.. and those who say that there are always “open source” softwares out there that you can use.. well one of the things you should really really really understand is that out of 6billion ppl in this world only 2% of us actually know what the heck open source is.. rest is the market waiting to buy software for their PC. Case in point: Microsoft Windows vs Linux/*nix

So the binaries are cheap — burning on CDs, packaging and distribution costs money.

Even with online goods, distribution costs money and time. Even unit sold needs to be supported and maintained. People have to be trained.

The initial investment has to be recovered and investments have to be made in future enhancements.

Now that doesn’t JUSTIFY the PRICE of software, but it gives it a cost.

You write it once, and then you make replicas without incurring any significant cost.

Are you saying that to mean that someone can easily copy-paste the code and launch it under a different name?

I would imagine that there are costs involved in even writing / reverse-engineering and rewriting some piece of software — e.g. its hard to copy Google’s algo even after they’ve described the basic idea behind it.

I’m asking becasue this was also mentioned on another blog I was reading but it didn’t make sense to me at that time as well – maybe I’m missing something.