Can “Free” Work for Enterprise Applications?

Is “Free” a business model or is it a marketing and distribution play? I briefly mentioned the Free Conversation in a post called Free Health Talk, and have been patting myself on the back ever since I came up with that clever post title. On a side note, one thing that I find interesting about this topic is that I’m not necessarily going out of my way to follow the conversation. It seems to be following me, because I’m following people on-line who are talking about it.

And now I’m talking about it…

What is the question again?

I think that it has been apparent from the start that free is not a business model, but I find the evolution of the answer to this question to be fascinating. Flickr has been around since February 2004 and, in my mind, wrote the blueprint on the Freemium business model that we are languishing over today.

We know that Freemium works on-line.

Now I want to know if the Freemium model can work for business software applications as well?

Yes AND No

In an excellent TechCrunch guest post entitled: Is Free The Future Of Enterprise Software? Yes And No, Aaron Levie, CEO and co-founder of Box.net says that Free can and will work for enterprise Software as a Service (SaaS) applications.

I tend to agree with him, with one caveat.

Try before you buy

I really like this idea for enterprise SaaS. And not just as a project manager who has been involved in a number of expensive technology acquisitions for large organizations, mind you. Getting buy-in from disparate organizations within an enterprise is crucial before a large scale change.

Here are three ways that vendors are letting company employees get hooked for free:

What about the risks?

Here is the rub. The hurdle for enterprise adoption of most SaaS business solutions is really high today. I sit in meetings all the time where someone will bring up a cool new SaaS tool and inevitably another someone will bring up the “catastrophic failure” risk.

If Company X goes out of business / has all their servers crash / stops answering the phone / etc., then we lose everything / experience unacceptable downtime / have to kill ourselves / etc.

If the data is important enough, there really isn’t a mitigation plan in the world that will appease decision makers who are concerned about this risk. Deferring the costs of owning, operating, maintaining and upgrading software and servers sounds awesome, no arguments there. However, transferring the risk of catastrophic failure to a start-up or even a company the size of Google, with limited to no recourse, sounds unfathomable to most large organizations with a need to control…

At the moment at least.

I’m sure things will change when success stories reach critical mass. Then we can write books that define the way things have been for the last five years, all over again. ;)

Your turn

What do you think? Can freemium work with enterprise SaaS? Or is it just an elaborate pipe-dream that will never come to fruition? What do you think of the fact that we are now able to define something that has existed for five years? Inquiring minds want to know.