Software as an investment

[mdlbear]

Interesting article at ONLamp.com on Calculating the True Price of Software. The author uses analytical tools normally used for pricing financial derivatives to pick apart a typical $100 software license fee. Basically, if you dissect it into a year's worth of free maintenance, an option to extend the maintenance contract, and an option to buy the next version at a discount, you end up with the software itself being worth about $3.35. That's what a rational investor would pay for it with no service and no price break on the next version. Sound familiar?

So the next time somebody asks you how RedHat, for example, makes money selling a free operating system...

Comments

[madfilkentist]

Read the article carefully, and you'll notice that the author is just pulling numbers out of a hat, with lots of financial mumbo-jumbo to obscure the technique.

[mdlbear]

Alas, you're probably right. On the other hand, some of the base numbers are superficially plausible, and RedHat does make money off of free software. So there may be something to the general idea.