A fair price for software

How would you set the price for a software application?  When a customer purchases software, they are purchasing “Intellectual Property”.  These days, Internet downloads of applications are a common distribution channel.  So the consumer receives no physical object.  At work, I have purchased a single licence for software in excess of $1000 US dollars (at a time when the exchange rate meant that it was worth something!).  In exchange for the company’s money, I got an e-mail with a product key.  Everything else, I had already downloaded from the Internet!

Software and intellectual property are things that are very difficult to put a price on.  Those people outside the computer industry can’t relate to how much hard work went into the production of something they can’t touch.  It’s probably fair to say that even in a manufactured product, most people do not have a good level of comprehension of how much effort went into the building of the product. (Including the development of the product).  But with a physical object at least they can see the craftsmanship and feel as though the money they paid is worth something.  There is also the matter of “comparative works”.  If you were to purchase a television, you have some idea about how much it should cost.  Once you have decided on a feature set, screen size, technology etc, you will know approximately how much you could expect to pay.  In software markets where there is direct competition from various manufacturers, it appears as though the pricing is fairly well formalised as well.  – For instance, in the market for video editing software, most shrink wrapped products are around the same price
It would be a fair assumption that the cost of producing a television in a given quantity would be fairly similar, no matter who manufactures the product.  Therefore, the price at which they sell can be neatly aligned. By and large however, there can be a great disparity with respect to the cost of producing software.  The price at which it sells however, is determined by the level of competition, not the cost of design and production.  As a result, price does not guarantee quality, nor features, nor usefulness.  Whilst in most markets this is strictly true, shoddy products simply cannot continue to be sold at high prices: the market works it out and the product stops selling

The intangible nature of pricing software, plus the ease with which files are copied leads to an inevitable problem: Software Piracy.  Given the choice of “free” versus any dollar figure, most people will choose free.  You can build a commercial model that competes against “free” and does so successfully – that’s not an argument I’m trying to make.   The point is most people “in the know” will look for freeware and/or open source projects* that suit their needs.

I would argue that once you get away from the computing industry, the average person in the street would not have a clue about “Open source software” even if they consider themselves “computer savvy” / “computer literate”.  They would however, know about pirated software… 

Pirating software is not something that I can condone. Put simply, I have not heard an excuse that makes it in any way acceptable to me.  I feel this way, undoubtedly because it hurts the industry that provides me with a pay-cheque.  It’s akin to “stabbing my fellow developer in the back”.  Ignoring that software piracy exists is being naïve.  Outside of the actual software industry, there often seems a mentality that it is an acceptable thing to do.  Possibly this is due to the excessively low conviction rate for software piracy or a “safety in numbers”/“everyone else is doing it” mentality. The excuses start with things like “I’m only an individual and not using it for a business” / “I’m only going to use the software once”. The variations of this excuse are many, but most revolve around the fact that it is acceptable for them to pirate software as long as someone else pays for it.

So there is no good answer to “what’s a fair price for software?”.  The only answer I can offer, is “the price the vendor charges for it”.  There are almost always freeware/open-source alternatives to commercial software.  If you aren’t willing to pay dollars for a feature set, look for the alternative open-source solution.  It may be clunky (it may well not be too!) or unfamiliar, but that’s the price you pay, for not paying a price!

* – Yes, I am aware that “Open source” is not the same as “freeware” and depending on the open source licence used, the software can cost money.  Typically (especially for “home use”) it tends not to be…