Can You Afford Free Software?

Purchasing Cooperatives are masters at piecing together a hodge-podge of free software tools to help them do their jobs. Need to do a mass mailing? Use Mailchimp. Need to collaborate across different home offices? There’s Google Docs. Need to make a conference call? Use UberConference.

SurveyMonkey, Doodle, HootSuite, Trello, Prezi… There’s lots of great free software out there. For Buying Groups with a limited operational budget and a high need to simply get the job done, these tools seem like a life saver.

But as a Purchasing Cooperative you have a unique responsibility when it comes to recommending free software to your members.

Nothing Is Free

We all know that there is no such thing as “free as a business model”. So how do the creators of free software hope to make their money? Well, there are two models driving free software.

Advertising As A Business Model

By this, we don’t mean displaying ads on the page in hopes that you’ll click them. The return rate on this type of advertising is so small (fractions of a penny per click) that the site has to be as popular as Facebook or YouTube to be profitable.

By advertising as a business model, we mean the creator of the software is offering free use of the software in hopes that you will buy something else. That something else may be a paid version of the software with increased functionality, or it may be a completely different service or product.

On its own, as long as everyone is honest and up-front, this model is relatively benign. The downsides for a Buying Group include:

• The software may not include all the functionality you need.
• There’s no support for the software if you have questions or problems.
• Because the software is a marketing device and not an end-product, it may not be updated with new features as often as you would like, and it becomes stagnant over time.
• If the company is not successful with its primary line of revenue, the software may disappear or may be converted into pay-per-use.

Surveillance As A Business Model

In this model, the creator of the software reserves the right to sell any private information it gains from you for commercial purposes. In our personal lives, we’ve all grown accustomed to giving away private data. But as a purchasing cooperative the data you are giving away doesn’t belong to you. It belongs to your members.

Whenever you use free software in your Purchasing Cooperative, you need to ask yourself whether you are giving away information that your members consider private. Are you putting your members’ sales, order, or customer data in someone else’s hands? It is hard enough to be an independent business these days without having the details of your business sold to your competitors.

The challenge is that there is no way of truly knowing if the company providing your free software is selling your information. Most terms of agreements contain vague clauses that would allow your data to be sold. Terms of agreements and licenses also change over time, often without you knowing it. Even if the founders of a company are adamant that they will not sell your data, the third party investors that fund the company may have other plans.

And remember, the two business models are not exclusive. In most cases, both are being used. And if they aren’t now, they will be in the future.

When Is It Acceptable to Use Free Software?

Only use free software if:

• It is not mission critical. Any task that is truly important to our company’s success is paid for.
• It doesn’t involve sensitive data. New product specifications? Keep those off of Google Docs.
• It’s not a task we do every day. Work with spreadsheets every day? You’ll need to pay for Excel.
• It’s not something you need help doing. LinkedIn is pretty simple. You won’t have to phone someone for help.

Most importantly, don’t rely on free software for anything that may affect customers. At that point, free would be too expensive.

Written by Steve Seguin

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LBMX offers a business-to-business marketplace platform, helping independent businesses, their Buying Groups, and suppliers buy better and sell more. Its Private Group Marketplace for Groups has transformed billing and ordering, rebate management, real-time analytics, e-commerce and product information management across the building materials, HVAC, plumbing, sporting goods, industrial supply, manufacturing, and agricultural industries. Its LBMX Supply Cloud platform allows suppliers to look at their industrial distribution customers through one lens, offering full EDI, PIM, Analytics and Payments.

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