Is Open Source Software Cheaper?

By Tony Baer

The myth of open source software is the aura of freedom that surrounds it. Download the source code and play with it if you wish. And best of all, you won't have to pay the freight.

Although that's the public image of open source, the reason why open source software is growing popular within enterprises has nothing to do with open source itself. Few enterprises care about whether they can monkey around with source code because the relative minority that still have active internal software development staffs have more important things to do.

Instead, the lure of open source is all about price. The perception is that (1) open source software levels the playing field and, therefore, makes software cheaper; (2) you can download and deploy the software for free; and (3) when you actually pay for something, you're "only" paying for annual subscriptions to technical support.

At first glance that sounds like a great deal. Instead of paying the purchase price, you only pay the equivalent of the 15% to 20% that you were going to pay anyway for annual maintenance.

That's great for customers, who can now eliminate the need to fork out huge upfront purchase costs for traditional "perpetual" licenses. But for any vendor that's been in the business for over 5 years, that's a major disruption to cash flow. If they can't count on those upfront sales, how are they going to fund product development?

OK, if you're a vendor, you could juggle the numbers so that after 4 or 5 years, your annual subscriptions end up to what you would have gotten had you sold a license up front and then received annual maintenance.

But wait. Wasn't the idea of software by subscription supposed to give customers the freedom to pull the plug at any time? In theory, yes, but then the customer must also factor in the cost of migrating to a competing product. In the case of open source offerings like Linux, the moving from Red to SuSE or vice versa might be nominal. But moving from MySQL to Ingres or Postgres might be another matter altogether.

Consequently, over the long haul, software shouldn't get cheaper just because it's open source or offered by subscription. Vendors still need to charge enough so they can afford to stay in business. Conversely, if a customer needs a product that can help them establish or maintain competitive edge, they'll pay whatever it's worth to them.

In other words, it's the laws of supply and demand producing a price that the market will bear.

Nonetheless, subscriptions for JBoss, MySQL, or Red Hat subscriptions are typically lower licenses for WebSphere or WebLogic, Oracle, or Windows, respectively.

But the pricing has nothing to do with the fact that those products are open source or offered via subscription. It's that the products like middleware, entry-level databases, and operating systems are perceived by the market as commodities. Nothing more and nothing less.

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