Developers are looking to capitalize on freemium software to test out the functionality of commercial solutions. For many, this is a captivating route for both the enterprise and for developers.
Remember when software came in just two varieties—home grown or via license from an external vendor? Those days were simpler, weren't they? Now, let's fast forward back to the present. We now have a wider spectrum of choices. This is a great thing, but the options can be bewildering.
On one end of the spectrum, you can download, customize and use open source software and at the other you can purchase it on a perpetual license and install it on premises. But it doesn't stop there. You can still build a home grown solution, you can opt to rent software on regular subscription Software as a Service (SaaS), or you can veer down the freemium software route with the likes of Dropbox, Yammer, Skype and, of course, Actuate's BIRT iHub F-Type, that provides both free and subscription paying functionality options.
Freemium is based on a pricing strategy model by which a product or service is provided free of charge, but additional premium proprietary features or capacity are available for a fee. The concept is nothing new. Think shareware back in the 1980s which took the form of a free time or limited feature 'lite 'version which was regularly given away on floppy disk or CD-ROM by computer magazines. The model really lends itself to software as the cost of distribution is inconsequential, so long as it doesn't get cannibalized by the introduction of another product.
Look at consumer software and freemium is all around you, especially in terms of mobile apps. But consumerization has also crept into enterprise as the arena undergoes a huge transformation. Enterprise vendors are now seeing the benefit of using the freemium model as a way to grow its potential paying enterprise customer base. The idea being that you capture the interest of developers and then convert their take-up into solid enterprise subscription revenue from their enterprises.
Cloud and SaaS are driving the concept of the freemium model within enterprise, with enterprise ISVs (independent software vendors) also dipping their toes in the water. Thanks to cloud software development, distribution costs are probably lower than we've ever seen. And, with growing customer curiosity and unprecedented access to information, freemium is winning the hearts and minds of customers and unlocking markets on a global scale.
In addition, enterprise software development is becoming a much more continual and collaborative process. Gone are the days when the enterprise software behemoth was slow to turn around, now he is a fast and agile beast. Thus anything that provides rapid feedback is a bonus. So, it's of little surprise that freemium has become increasingly attractive.
Our connected world has also helped to accelerate the freemium model. Social media and networking platforms offer a fast way to build a buzz around a product amongst developers and coders. With zero dollars to shell out initially developers can hop aboard and try out freemium products their peers are going wild about.
The advantages are clear for an enterprise developer and IT purchasers; but what about for the suppliers? Well it really is a no-brainer for vendors who already have an existing user base established, such as within an open source community. Why? Because a freemium version of the complemented or extended commercial solution is a great way to rapidly expand the user base and provide a stepping stone towards monetization, at the same time.
Freemium Does Not Equal Open Source
This is probably an ideal point in this article to highlight the fact that freemium and open source are not one and the same, if you are not already familiar with the models. Open source provides under the hood access to the underlying code—enabling developers to examine and modify it, if they so choose. Freemium software does not. But freemium software is targeted to developers and provides both a ready-made deployment platform and the ability to customize apps built around it.
It is also key to understand that the benefit of a community is not just about the size of the potential audience for a freemium product or service. Software suppliers can also soak up the collective knowledge of a community and get feedback on the future roadmap of a product. Think of it as R&D, gratis.
Once interest starts to materialize for an app, the freemium player needs to carefully plot the path to a paid version, in order to make it an attractive next-step—while being mindful of not frightening away entry-level users by excessively limiting the freemium version. At the same time the simplicity and quality of the offering must be consistent across free and paid offerings. This step in the game is critical to the success of the freemium model.
A Good User Experience and Value Are Key
Remember you can't attract customers, free or paid, if you don't have a great product. Only software that enables the enterprise developer to produce results quickly— and without lengthy training or procurement times—will be a success.
At the C level, heads of IT want to see their development teams build apps that work for the business processes as well as for their customers. If the freemium model offers them the functionality and benefits they want, in the time provided and without hefty training budgets, they will rapidly hop on board.
Freemium Is Worth Considering
For ISVs actively looking to extend their go-to-market strategy via freemium, the upshot is that if you can't deliver a solution that IT-business enterprise teams can get to grips with in around 15 minutes, you need to get back to the design table.
For the enterprise developer the message is simple. Look out for freemium apps that you can use productively right away. If you think there is a massive learning curve involved, don't bother jumping through the first hoop. A better freemium option will likely be right around the corner.
A new day is dawning in enterprise software sales and most companies would be wise to explore the freemium model. You might be surprised what benefits you will find.
About the Author
Michael Williams is BIRT Product Evangelist & Forums Manager at embedded analytics and reporting leader Actuate Corporation, the co-founder of successful open source project BIRT (a top level project of the Eclipse Foundation). Actuate makes available the freemium BIRT iHub F-Type™ and licenses enterprise BIRT iHub via subscription.
Follow Michael on Twitter @mwilliams_birt or visit his blog http://blogs.actuate.com/author/mwilliams/.