Let us be clear: cheap software usually equals low quality software. Unless it's a free open source thing developed by enthusiasts for enthusiasts. However, not every piece of software that seems cheap is actually cheap by nature. It's about a pricing model. In this article, we'll discuss how software vendors charge for their products, and why high quality software can be affordable.
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What Is a Pricing Model
The software market is very competitive. Today's software companies are very creative in how they price, not like decades ago when a company only made money selling you a boxed software solution and then charged you for updates. Now it's the age of pricing models.
A pricing model is a strategy used by software vendors to determine the cost of their product and how it will be billed to customers. It takes into account various factors such as the value provided by the software, development and maintenance costs, target audience, and competitive landscape. A good pricing model offers attractive pricing that encourages customers to purchase the software. While a bad pricing model makes people run away, because they care about money, or just don't have it.
What Pricing Models Can Be
Decades ago everything was simple: people were offered free shareware versions, that allowed them to decide if they like the software before purchasing it. Today there are more ways to make people spend money.
Perpetual License
This model is common with traditional on-premise software installations. The customer pays a one-time fee to purchase the software and receives a perpetual license to use it indefinitely. Once you've bought it — it's fully yours! For this reason, perpetual license software is expensive in comparison to other pricing models.
Subscription
This model is popular with Software as a Service (SaaS) platforms, where the software is hosted in the cloud and continuously updated. Subscription-based pricing involves customers paying a recurring fee, usually monthly or annually, to access and use the software. Those who choose to pay annually, get a discount. Since you actually rent the software, this model allows you to save money: pay as you use the software, and don't forget to cancel your subscription if you don't need it anymore.
Freemium
The freemium model offers a basic version of the software for free, with additional features and capabilities available through paid premium plans. This allows users to try the software at no cost and encourages them to upgrade if they need the premium features.
Pay-as-You-Go
With a pay-as-you-go pricing model, customers are charged based on their actual usage of the software or specific features. This can include billing based on the number of users, data storage, or other measurable metrics.
Tiered Pricing
In tiered pricing, the software vendor offers multiple pricing plans, each with a different set of features and capabilities. Customers can choose the plan that best suits their needs and budget, and they can often upgrade or downgrade between tiers as their requirements change.
Feature-Based
This pricing model focuses on charging customers based on the specific features or modules they choose to use within the software. This allows for a more customizable pricing structure and enables customers to only pay for what they need.
Enterprise or Custom Pricing
For large organizations or those with unique requirements, software vendors may offer custom pricing tailored to the specific needs of the customer. Usually, this approach involves negotiating a contract that includes custom features, support, and pricing terms.
The beauty of all these models, except for the perpetual license, is that you don't actually buy the software, you rent it. Therefore, even super-complex professional software will seem «cheap» and be affordable for anyone.
But Still: Can Good Software Be Cheap?
Well, some cheap software may offer good value for money if it meets your needs and expectations, while some expensive software may be overpriced or overhyped. Moreover, a lot of really great software tools are free — either for ideological reasons or because of the chosen monetization model.
You see, there is a common misconception that high quality software costs more to produce than low quality software, and hence it's price must be higher. Actually, high quality software is cheaper to produce in the long run, because it reduces the amount of technical debt, rework, and defects that slow down development and increase maintenance costs.
There are other factors that affect the price of software, such as market demand, competition, innovation, licensing, etc. So everything is relative, like Einstein said.
Conclusion
So, the true cost of software is not always what it seems. Today, when the perpetual license pricing model is a thing of the past, and you see many other pricing models, we can say: good, high quality software doesn't have to be expensive and it can be affordable.
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