The Packet Scoop

Until a few years ago, business software companies earned their revenue by charging for up-front perpetual license fees and ongoing maintenance. Then, as mentioned above, the SaaS models (Salesforce.com) emerged. Now, some vendors are giving away their software!

Enter SpiceWorks, a company trying to ‘spice up’ the IT market. The founders believe that people don’t want to pay for management software so they are giving away their SaaS model software. SpiceWorks just received $8 MM in financing from Shasta Ventures to go with the $5 MM they had already received from Austin Ventures (who, by the way, are early backers of SolarWinds). The company generates revenue through their ads on their software. That is, each page on the software has an area dedicated to targeted ads, kind of like a Google results page.

SpiceWorks has generated about 120,000 downloads in less than two years. That’s pretty good by any measure. How many of those downloads are really end users who actually use the software is a different story and except for the SpiceWorks team, no one really knows. What we do know is that SpiceWorks admits that its software is for smaller IT departments and they don’t support wide area networks, multiple office locations or other features required to manage sophisticated heterogeneous network architectures.

My bet is that SpiceWorks will not be able to drive their own revenue purely through ad placement. I think they’re signing up eyeballs to either sell the business to a higher end vendor, or they are secretly building a more robust paid version.

Regardless, IT departments want software that is reliable, secure, and continually improving. With their reputations and legal fortunes on the line, the consequences of a program gone awry could be painful — and definitely not worth the price of free non-open source software. For that reason, I believe the commercial vendors will continue to thrive. Knowing support is a phone call away (assuming you can get through) is comforting.