Ever since I had my first job, I have wondered about the concept of “Free” in corporate world. And many years later, I am pretty convinced free is usually a bad strategy for all parties. This is strictly a rant on my personal views – nothing official about it, and do not represent the views of my present and past employers .
Nothing is really free
That took me some time to realize – absolutely nothing is really free. Someone has to pick up the tab always. Since I have worked in the consulting business most of my life – let me use that as backdrop to explain . This is true for big and small consulting companies I have worked for.
Customers do pay a pretty penny for consulting – and rightfully think that since they are giving so much business for the consulting vendor, they should get some things for free. This is usually in the form of proof of concept work. And most of the time – Vendors do agree to throw in free POCs. Vendors do not do this out of kindness – since they typically do this only if there is upside down the line for them via more business. The POC starts – customer does not always go all-in for these projects , given they are not putting in direct money on the table. And eventually the project finishes with no one happy and no decisions made . The Vendor does not exactly lose here – they will make it up in next project, either at that customer or at another customer. Those vendors who do not have multiple projects and clients might actually lose serious money in these POCs, and hence they might not do it a second time either. Whichever way you look at it – no body is moving a good step forward in this picture.
Even when something is given away for free, it does not get used much
If you walk the show floor at any trade show, you will get a lot of free stuff – from coffee mugs to iPads. I have seen software companies give iPads to their prospects and clients preloaded with presentations etc, that usually end up in a teenager’s back pack in few days, usually without the presentation ever being looked at. And no prizes for guessing who is paying for those iPads 🙂
Then there is the case of vendor charging a maintenance fees for software, and using part or all of that fees for “free” new functionality added to already sold software. Customers might genuinely like to see all kinds of things to come out of this arrangement for free – new business processes, mobility, BI etc. The hard part is – it is next to impossible to draw a clean line on what should be free.
If you look at the adoption of the new functionality provided for free , very rarely do you see big adoption. But if you look in further – there might be other reasons for this , like cost of hardware, testing, change management etc. So on one hand, the vendor uses a lot of money for making stuff, and on other hand customer has no way of using it – due to lack of awareness, lack of resources or lack of interest. The take away here is again that Free did not work as expected.
It can of course be argued that in a multi-tenant SaaS model, customers might use free stuff more often. I seriously doubt it. Example : if you never had parallel ledgers till today, and now your cloud vendor gave it to you for free – will you implement it ? Many customers will not – either because they don’t care, or because it needs more change management , SI work etc (probably less than on premises world, but still usually enough to help inertia rule). And it is not as if cloud does not have lock in – if you have any doubts, look at the SEC filings of cloud companies on internet.
Should Vendors charge for a different UI or for mobile versions of existing applications ?
UIs will change over time – as technology changes (hardware and software advances, consumerization of IT and all that) . Should Vendors charge for that? Will making it free increase adoption and make customers happy? I don’t know the answer – but my (of course biased) answer is that it is fair to charge for this. Here is my rationale – when customers don’t like UIs, they will find work arounds. Vast number of screens delivered by vendors are replaced by loads from spreadsheets . I know a company where the financial analyst loads JV entries twice a day by putting it in an excel sheet and putting it in a sharepoint drive, System does the rest and the analyst is happy and productive. I have asked this guy personally many times if a different UI is a better solution, and he consistently likes to stick with his excel in sharepoint approach. I know a hundred other examples like this where people refuse to move to better UI for fear of change. Giving a free UI for these cases just would be a bad investment.
Mobile is a harder nut to crack. Vendors with a limited footprint – like just HR or just CRM as their offering, might throw it in for free and build it into their price case. I think that is the right thing to do for them since it makes business sense. However, for vendors who sell many different things – they might not have a good way to do this across their portfolio. For these cases – All I can say is “pick your battles” . They are probably better off selling packages mobile applications for best usecases. Or they might sell (or partner with) some development platform that helps customers build their own. Or maybe leave it to the partner ecosystem to bridge that gap. It might also make sense to throw in a few things for free on mobility front if it makes sense for competitive reasons.
But if you charge – what is fair and what is not? I have a simple POV on that – the price to charge is the maximum $$ that will not stand in the way of adoption. Price is driven by market – if you over charge, customers won’t buy and use it. So start with what you think is fair, adjust as you go – with a good tradeoff between adoption and your financial KPIs like revenue and margin.
What about consumer side of the house?
You would think that consumers are happy with all the free stuff they get – like facebook, free uploads in flickr and so on. Nothing is really free there either – you still pay in terms of sacrificing privacy, suffering through advertisements (or paying to avoid the advertisement). And of course you use the same facebook to complain of their free service 🙂
So in short (well, I guess this was not very short – sorry) – I doubt “free” really works anywhere. There is no free lunch – I have accepted that and made peace with it. What do you think ?