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Kevin Walzer, software developer.



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Tue, 05 Sep 2006

Closed Source--It Pays?

After a lot of thought, I've make a big decision: my end-user programs are now closed-source.

I've been a bit of an open-source crusader up until now. This is a sharp reversal in my approach to developing software.

Why do this?

Money. You can skip the rest of this blog entry if you want, since that pretty much sums it up, but I'll elaborate anyway.

Since starting to release my software on parallel tracks this past summer--a free Unix-style version, and an inexpensive Aqua version--I've been pleasantly surprised. Sales have been decent.

But let's be honest: decent sales of a $6.25 product don't translate into substantial dollars. That's a given. So what's the best way to increase revenue? Sell a lot more copies, or raise my price.

With a fully-functional free version available, it's hard to sell in high volume. I'm competing with myself. With a free version available, a lot of people are just going to use that. And with a fully-functional free version available, it's hard to raise prices. I'm still competing with myself.

As Eric Sink, a prominent software developer with roots in both the open-source community (he was the original developer of the AbiWord word processing program) and commercial/proprietary software (he owns a highly successful company called SourceGear), puts it:

Like I said above, you can understand a lot about a company if you know roughly what its gross margins are. For example, understanding gross margin is the key to explaining why most open source companies tend to struggle. Fanatics can argue all day about whether or not open source business models work. Clearly they can, as there are several very impressive companies whose products are available as open source.

However, just as I mentioned last month, this is a situation where the typical programmer's black-and-white thinking doesn't help us find smart answers. The wrong question is "Do open source business ever work?" The right question is "Does an open source approach makes the business of software easier or harder?"

From a strictly financial perspective, I think open source makes things harder. An open source product is a commodity. Your version of Linux is essentially the same as mine. If you try to charge too much of a premium, I will undercut you on price, and people will start getting Linux from me instead. Open source companies tend to operate at lower gross margins. That doesn't mean that open source can never work as a business model. However, no matter what anybody says, if two companies have the same risks and operational costs, the low-margin company is a lot harder to manage than the high-margin company.

That's it in a nutshell. As someone who is self-employed, it's important that I maximize those margins as much as possible. Keeping my programs open-source, and generously offering a free version, meant that my margins would be unsustainably low.

So: it's a business decision to close the source of my programs. The older versions are still out there, with source code available. The new versions haven't gone through a radical transformation. But the crucial parts that I need closed--such as the algorithms that enforce a 30-day trial limit, after which the program won't function--are new. And, going forward, I expect the code base of these programs to diverge from the older open-source ones.

It's a business decision. Nothing more, nothing less. It's a decision I'm free to make, because I'm the sole copyright holder (I have received exactly one patch from an end user in two years of developing software, and that patch was offered when the program in question was licensed under terms that allowed closed-sourcing). Any open-source components that I continue to use will be used in accordance with the relevant license (i.e. the Nuvola icon theme that I use is licensed under the LGPL.)

I'll continue to release some things as open-source--libraries that benefit me and might benefit other developers. And if I modify a program that is already open-source, as I did with AquaTkbibtex, that will be open source. But my main investment of time will be spent improving the commercial software I develop--and growing that business. And my software development will stand or fail on that basis.

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Corrupted Downloads from Lulu

It's come to my attention that some people who have purchased software from me via Lulu.com have encountered file corruption--specifically, the disk image (DMG) files for version 1.0 (Aqua) of Port Authority and VuMan couldn't be opened.

If you have experienced a problem of this sort and haven't heard from me, please contact me via the "Your Host" link on the sidebar of this blog; I'll get in touch with you to make arrangements for an alternative download.

By the way, the new versions of these programs that I just released come in a different download format, so file corruption should not be an issue at this point.

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A Big Day for Software Releases

I've released new versions of Port Authority, my GUI for MacPorts, and VuMan, my man page viewer. 30-day Aqua demos of each program are available for download, the full programs can be purchased, and free updates for paid users of previous versions can also be downloaded.

I've also released a new program, NameFind, a search utility that focuses on finding files by name on your system. The Mac's built-in Spotlight search technology is powerful, but it's slow and complex, and many users complain about it. My program is a good alternative for users who just want to look for files by name on their system.

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