Information wants to be free! Software should be free! PCs should be free! Cars should be free! Beach side properties in Hawaii with 200 yards of beach front and 20 acres of grounds should be free! Can you see where I’m going with this? Not into the arms of French Anarchist Pierre-Joseph Proudhon, who declared “La propriété, c’est le vol!” (property is theft).

The capitalist system is not without its faults, but it is very effective at “allocating scarce resources among competing uses”. The market mechanism, implemented in a multitude of ways, is the engine of the capitalist system, and it has the wonderful advantage that it doesn’t require a great deal of oversight. But it appears to raise paradoxes when you examine the software market. Consider the issue of Falling Transaction Costs, which is relevant to what I’m discussing here. The key fact from the link above is that computer transaction costs fall at the rate of about 20% per year driven by both Moore’s Law and Metcalfe’s Law. You would think, wouldn’t you, that the cost of software ought to follow the same type of curve?

The Software Market

Here we are in 2008 and I go into the Apple store yesterday to discover that Microsoft wants to charge me $239 for an upgrade to Office 2008 (from Office 2004 on the Mac). I’m not sure I even paid that much for Office 2004 in the first place, and I’m certainly not going to buy. Now if I look on the Internet I’ll discover that NeoOffice, a very capable Office clone and a reputable Open Source effort is available for nothing at all. If Microsoft Office is overpriced, is it fair to say that NeoWare is underpriced? Nothing does seem like a very low price.

Let’s deal with Microsoft first.

The company is a monopolist that takes no note of the cost of production of its software. It charges a high price that leverages its monopoly position. The only mechanism available to correct this “market defying tactic” is antitrust action. From a business perspective Microsoft got very lucky in 2000. George Bush got elected and one of his first moves was to squash the action that the US DOJ was taking against Microsoft. The US policy on regulating monopolies has since been “Companies shouldn’t be regulated for any reason, in any way, any where, at any time, by any one, ever, at all.”

Europe (an economic block that is actually larger than the US) has a different policy which can roughly be stated as: “Monopolies are fundamentally unhealthy and need to be regulated, and that means you Microsoft.” Action by the European Union against Microsoft resulted in the recent $1.3billion-do-we-have-your-attention-now fine. No matter whether you think the fine is too high or too low or, as Goldilocks would say, “just right”, it’s worth noting that the fine is only likely to push the price of an Office 2008 upgrade higher. So that’s a result? Not.

The only thing likely to pull the price down is competition. And, as I have said, MS Office has such competition on the Mac from NeoWare. And the price of NeoWare is nothing.

Or is it?

Ten Reasons Why Nothing is not Nothing

Conceptually you’d expect free software that is pretty similar in function to seriously over priced software to sweep the market. In some areas it does, but in some it doesn’t. Why?

The answer is that all software has hidden costs and some of these costs are prohibitive for some buyers. Here’s a list of ten reasons why free software may not be free, as far as the buyer is concerned:

1. Brand FUD: Microsoft is a well recognized brand, NeoWare is not. The fear here is imaginary. You imagine that there will be problems with the NeoWare product. This leads to uncertainty and doubt. This stops some people from buying the free product.
2. Price FUD: In this world you get what you pay for. Pay nothing, get nothing. Freeness arouses suspicion in many people and for good reason, usually. It’s not just the brand, it’s the freeness.
3. Cloneliness: How much of a product clone is NeoWare? If it’s not exactly the same, how close is it? Will it display all my Word files accurately (most, yes, all of them, probably not). How much effort is that going to impose on me?
4. Narcissism/Image: If I use this product people will think I’m a geek. I’d rather stay in the mainstream. It could work the other way, of course: Geek is chic! That’s how it is with fashion. There’s a generation of kids out there who won’t pay for music, but will pay for ring tones. Figure that, if you can.
5. Installation FUD: What if it just screws everything up. Who’s throat do I choke. This may relate to brand FUD but it’s slightly different. It doesn’t apply on a Mac in my experience because the software never screws your system, but Windows is different. On Windows, Microsoft software installations tend to work, but how good are the Open Source alternatives? It’s FUD.
6. The Learning Curve: “Don’t teach me how to fish, just take me to a fish shop.” In reality the learning curve is probably bigger for Office 2008 than NeoWare. But the perception may be otherwise. And, some free software products do impose a learning curve.
7. Support: If something costs nothing, will you ever get service, if you need it? Actually this is the revenue stream that most free software depends on, so it shouldn’t be a problem. In reality for desktop software the Internet is your best support channel. Forget the telephone. But for many people it’s “someone I know” and if that someone doesn’t have NeoWare, maybe NeoWare is risky for you.
8. Software Management: Managing a PC sucks. Why not just use Zoho or Google for word processing and ditch both MS Office and NeoWare. Yes. why not? You have to manage the software and the goddam files and who knows what grief is in store if your disk dies? This is a hidden cost – and you may believe it’s lower with the devil you know.
9. Non-buyers Remorse: I never paid for it and there’s this button on the web site asking for donations, so I’ll send the NeoWare team $10. It’s only fair. You may not be afflicted like this. I am.
10. Availability: MS Office is just easier to find. I bought it at Fry’s when I bought the computer. I just didn’t see any NeoWare on the shelves.

So, like it or not, that’s why Microsoft can charge $239 for an Office upgrade.