Free Lunches and Bubbles
March 19th, 2009[ Software Development ]
So apparently we don’t learn from our mistakes? I love it that it’s news in 2009 that a business requires revenue to sustain themselves.
“Ultimately, though, every business needs revenues—and advertising, it transpires, is not going to provide enough. Free content and services were a beguiling idea. But the lesson of two internet bubbles is that somebody somewhere is going to have to pick up the tab for lunch.”
For me, the subtle part of this is when you think about how many responsible businesses don’t exist today because of this approach. Over the short haul, it’s tough to pit reasonable business plans directly against unreasonable ‘free’ handouts. Sure there are some who stuck to their guns and succeeded but they’re the exception.
We see similar behaviour on the services side with BandOfCoders. There’s always a lower, and usually unreasonable, bid. It’s easy to get drawn into that but before you know it you’ll be forced to sacrifice what differentiated you in the first place. Inefficiencies, and driving them out of your company, is one thing but unsustainable businesses are just hard to compete with.
In our case, we typically don’t compete. A lot of those projects and clients return to us after having spent more than our original quote and ending up with far less. It’s unfortunate but something that often requires first hand experience.
The same exists with ‘free’ applications or services. You need to be very aware of the applications you use regardless of price. There’s typically a real cost to you, or your company, associated with migrating off any service or application. An unreasonable business model will eventually fail and you’ll have to find a new home and pay those real costs to migrate there.
This is also why offerings like Bizspark mean nothing to me personally. If you choose a tech stack to build your business around purely because of a few free years, you’re naive and in trouble. Nothing against Bizspark as the same applies to an open source stack, don’t choose a foundation for your business because of free licensing costs!