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Want Free Business Software? Just Look At The Ads

Forget the mantra of Salesforce.com's Marc Benioff and a handful of other industry chatterbugs that "Software is Dead," and consider an even more radical concept: Paying for software is dead.
Forget the mantra of Salesforce.com's Marc Benioff and a handful of other industry chatterbugs that "Software is Dead," and consider an even more radical concept: Paying for software is dead.An increasing number of small companies are using free business software that Microsoft, Google, Spiceworks, and other vendors offer that is paid for by advertisers. I'm not talking about things like Google or Yahoo e-mail that are popular among consumers. With Microsoft Office Live Basic, for example, you can get a hosted Web site, 25 e-mail accounts, and 500 Mbytes of Web site storage -- as long as you'll subject yourself to ads by Best Buy, American Express, and others.

And guess what? More businesses want ad-supported software. Research will be released next week by consulting company McKinsey & Co. and venture capital firm Sand Hill Group, based on a survey of 475 IT and business executives, that shows one in three respondents plan to use ad-based software within two years. Pretty amazing, isn't it? The research will be presented at the Software 2007 conference (sponsored by CMP, InformationWeek's parent company) in Santa Clara, Calif., next week.

But will free, ad-supported software work for anything other than a small business? Good question. One in three IT executives may want it, but the targeted advertising model gets muddled once the user base expands. As Spiceworks' co-founder Jay Hallberg notes, "You won't find people dancing about low mortgage rates on our software." Since Spiceworks went beta last July and released version 1.0 of its IT network management software in January, it has gained 80,000 users of its software and big-name advertisers including Hewlett-Packard and McAfee.

Baris Cetinok, director of project management and marketing of Microsoft Office Live, notes that large businesses aren't as interested in free software because they realize there are a lot of other costs associated with maintenance, support, and training. (Cetinok doesn't mention that other problem, too, that free software for big business could eat into Microsoft's current user base.)

So would you use ad-supported software? Does it make sense beyond the mom-and-pop Web site or small business? Share your thoughts below, and look for more coverage on this topic at InformationWeek.com over the next few days.