Software pricing has always presented a conundrum, both for vendors and for the customer. In the pre-Internet days software pricing on servers was roughly proportional to the cost of the hardware. In the days of mainframes and minicomputers this seemed rational, but as the servers morphed into anything from a lonely Intel box to a high-end cluster, it began to get complicated and it was quite possible that, with expensive software such as the big name database products, the structure of software pricing could limit or determine hardware choice.

This evolved to the point where – for example – Oracle’s database technology was specifically designed to run on inexpensive commodity servers (via Oracle’s RAC technology), with the idea that if the hardware costs are low, the overall ticket price is lower. Such developments would be fine if all vendors stayed completely in step in terms of pricing policy. But that doesn’t happen.

So the corporate technology buyers have a mess on their hands in trying to build rational and reasonably priced corporate networks. Licensing is a potential nightmare that completely distorts costs. The mess is made greater by the onset of virtualization, which further muddies waters that were already supersaturated with mud.

Once any vendor gets into a monopoly position, or even a position of significant leverage, it tends to maintain the price of its product and seek to commoditize everything around it. The battle plays out on your network. With software vendors, if their sales are climbing then their unit costs are definitely trending down, but the customer rarely sees any benefit from this.

This is one of the reasons that Open Source is important and why corporations really should have a policy of using it to some degree – and I’m not just talking Linux here, I mean the LAMP stack plus the JBOSS stack plus a little bit of Open Office plus anything else that can deliver benefit. It will help to keep the vendors of proprietary software honest – and incidentally, a good deal of Open Source it is quality software.

Cloud’s On The Horizon

Open source has long been a viable option within the corporation, but it is now becoming a force for change. For better or worse, it is now part of the fabric of the IT industry. The area of the IT industry that was never been backward in adopting Open Source, and were instrumental in establishing it, are the xSPs – now referred to generally service providers. They have always been enthusiastic users of free software and, web hosting companies in particular seem to use almost nothing else. (That in turn means that hosted bloggers like me use almost nothing else, because I use the software they provide.)

Open Source imposes a constraining business model on anyone who wants to make a business out of selling the Open Source software. The GPL pretty much torpedoes any business model based on the direct software sales of the Open Source product. But the GPL doesn’t and cannot prevent people renting the software out, no matter whether the company doing the renting simply claims to be charging for support or claims to be offering Software As A Service (SaaS). When you buy SaaS you do not contract to use specific products, you simply contract to use an application or a set of applications – and, at the end of the day, applications are what IT is about.

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