The Hidden Costs of Free Software

Every company has to make a profit or they will go out of business. There are very real costs to offering 'free' services and they can end up costing you far more than paid solutions.
Here are some thoughts to consider when making a decision.

A Caveat
This article focuses primarily on Software as a Service (SaaS) business models because they have ongoing costs and requirements for support and maintenance. Specifically, it focuses on mission critical business systems like customer relationship management, order management and billing, customer support and information management. Some of the considerations such as design quality and support can apply to other software but to a lesser degree since with non SaaS applications the end user typically provides and manages all of the required resources.

The Fundamental Problem
The fundamental problem with free (or extremely low cost) services is their longevity. If a business fails to make itself profitable then it's likely that at some point it will disappear and you risk losing all of the data stored within that system. Just ask one simple question - can this business sustain itself with their pricing model?

Running a software service platform requires resources. Whether it's CRM, order processing, document collaboration or shipping automation, somebody has to write and manage the code that makes the magic happen. This type of position generally pays $60-100k+ per year. This is an ongoing expense because somebody has to continue updating the software, performing maintenance and adding new features.


Once the service is ready for clients it has to be installed on web servers. A decent dedicated web server from a reputable company with an established data center will range from $200-500/month per server. You could install and manage your own servers but then you would be out several thousand dollars per server plus the yearly salary for a server admin ... which also runs over $60k/year.

It costs somebody time and money to run a software service and most people can't work for free indefinitely.

Is it a complete platform?
SaaS vendors should provide a complete platform. This means that you are able to use the service and they take care of everything else - hardware, software, updates, security and maintenance. One of the huge advantages of this type of service are that it significantly lowers your deployment time and costs. Generally with this type of service you should be able to be up in running in hours, not days - and shouldn't have to worry about any of the underlying technology.

Find out how reliable the network and systems used to run the software are. For a business environment you need to know how frequently they experience downtime and how quickly they resolve problems. If you are trying to access data for your business and it's unavailable then it's slowing your work down and costing you time.

What happens if you're trying to resolve a customer issue and you can't pull up previous notes about their account from your CRM? What happens if your customers are trying to connect to your website or e-commerce system and your site is unavailable - they'll go to one of your competitors.

When you need help will you be waiting days for a response?
Can you get help or recommendations for best practices using the service?
Does the vendor have a service level agreement (SLA) regarding their availability?

Updates and Maintenance
How frequent are updates and upgrades?
Who makes sure everything runs smoothly?
Is the system adequately secured against intrusions?

Final Thoughts
You've put too much time and energy into building your business to gamble with potentially unreliable systems. If you're going to implement a platform for customer and order management, document collaboration, marketing and sales automation, invoicing and e-commerce you will rely heavily on it and anything interrupting those critical systems can cripple your business.