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THE BELL TOLLS FOR THE SOFTWARE TOLLGATES

Philip Copeman explains why TurboCASH has adopted the Open Source Model.

Pink Software is South Africa's oldest software publisher. After 18 years of running a successful business software model, we have chosen to make TurboCASH available under the General Public License (GPL). So from now on anyone is allowed to copy and distribute TurboCASH Accounting. To understand how we came to this momentous decision, we need to cover a little of the history of software publishing.

I bought my first computer in 1979, an Apple II plus. In those days all programs were interpreted basic and came presented in source form. That means that the users, with a little bit of skill are able to see the inner workings of a program. In those days most users were programmers. Innovation was a cornerstone of the industry. You could basically "steal" someone else's source, modify it and have your own product available shortly afterward. This is how Lotus 1-2-3 was built, as a clone of Visicalc. How different the world might have been had it stayed this way.

EXE files came into commercial use with the arrival of the IBM PC in 1982. Lotus was one of the first products built on the tollgate model. In the tollgate model what you do as a vendor is develop a program and present it to users as a means of doing a business task that they have. At first your main aim is to get as much traffic onto your "highway" as possible. You do this with marketing campaigns and by introducing the product at a very competitive price.

Once you have high traffic, you put up a tollgate, a software upgrade or an annual licence fee. The marketing department has the job of deciding how high we can crank up the price of the revenues without our users jumping off the road. The users find it difficult to move their data and their systems and they like the ability to exchange data with others on the highway. They are reluctant to get off. So it's not surprising that prices for these packages keep rising.

Tollgate vendors also have a strong legal department to make sure that no other vendor copies the product and puts up a parallel highway that will give the users the ability to jump off to a cheaper option. This is what all the legal cases were about over the last 20 years: Xerox vs Apple, Apple vs Microsoft, Microsoft vs DRDOS. Lotus killed off anyone that attempted to make a spreadsheet, so companies like VP Planner or Lucid 3D disappeared. This is basically how all the early Dos products were built, Wordstar, Word Perfect, DBase, Novell networks. Our own industry was saved only be the intervention of the Department of Justice who blocked the Microsoft take over of Intuit Software (the vendors for QuickBooks).

We were even involved in our own copyright case with TurboCASH vs Pastel in 1992. We lost and Pastel went on the get a near monopoly of the South African accounting market. The result: prices of entry level accounting packages went up from R 500 to R 5000. Similar stories are to be found in the USA (QuickBooks), UK (Sage), Australia (MYOB) and Canada (Simply Accounting). Everywhere that the tollgates go up, prices are sure to follow.

The masters of the Tollgate model were, and still are, Microsoft. Starting from 1992, with Windows, they got users onto the toll road. Early versions of Windows were free. At first windows ran as an application on top of DOS, but eventually Windows became the ticket to the tollgate. It was only after the operating system became successful that the prices started to rise. This however was not enough for a rapacious revenue machine, so using the advantage of the operating system they started to chase down all the application vendors. This is how Lotus 1-2-3 gave way to Excel, Word Perfect to Word, Dbase to Access, Novell to Windows NT, and Netscape to IE5. This is how a word processor moved from costing $49 to $500. This is why an operating system has gone from being almost free to become the most expensive part of a computer purchase.

In the mid nineties a new movement, the Open Source movement started in the development community. This has a completely different approach. Its starts out with the position that the Software belongs to the users. The highway is built by the users. The users have an input in where the highway goes. There are no tollgates. The users have the advantage that they have access to the working of the program and they have the obligation that if they make improvements to the system that these improvements must be provided back to the community free of charge. The biggest success of the Model had been the Linux, TCP/IP and the Apache web server. Most of the Internet has been built on Open Source software. Recent successes by MySQL in the database market have shown that even bigger users are ready for Open Source.

Recently business packages have started to become available under the Open Source license. Most successful of these are Open Office and Mozilla. Now TurboCASH has joined the Open Source Movement. Our aim is to be the world's leading Open Source entry level accounting program. We are making the last 18 years of our research available free to all users and programmers and we are putting into place a system that will provide you with all the innovations that our community creates.

The Tollgate vendors argue that the software is their intellectual copyright and that they need the revenues to sustain their extensive marketing departments. It is the legion of programmers that we must feed to keep up the highway. The effect is in fact the opposite. Tollgate suppliers hold the users to ransom and pervert the development process. It is more important for a tollgate vendor to keep you on the road than it is to innovate. You actually end up paying for a legion of salesmen not programmers.

This no more evident than in the Word Processor market. It is a simple matter to build a world class word processor. It would take about R5 million and 4 years, but this is small compared to the hundreds of Millions that Microsoft makes out of the Word processor market in South Africa alone.. They hold the users to ransom, not by quality research, but by the fact that their closed data format makes it difficult to know that someone else can read your document if you don't use Word to write it. The product itself has hardly improved over the last 10 years, but the price has moved from $49 to $500!
It is a fact that very little of your Rand spent on Software makes it back to research. Most of it goes to distribution and to feed a marketing machine whose job it is to tell you that you are doing the right thing and to keep paying the fees. The open Source vendors rely on a completely different channel. The traditional retail software vendors are under pressure. The are being replaced by Internet delivery and by magazines. Your own .NET magazine has effectively become the biggest distributor of Software in South Africa with its cover disk every month. The pressure of this channel is the strength of the Open Source movement. It is a movement that is unstoppable.

This begs the question how will we make money from TurboCASH if we give it away for free? The first key to it is that our production costs are an order of magnitude cheaper than that of the mainline Accounting vendors. We are able to deliver hundred of thousands of copies without tax invoices, delivery charges, installation, registration, dongle security. We do not pay licence fees to database companies or have expensive support departments. Because our code is open, it a simple matter for consultants and users all over the world to easily modify and install TurboCASH.

We will make our money from selling commodities like invoice and statement paper, where we are able to use the large volume we print to provide cheaper prices; setup training workshops to teach TurboCASH and sell support contract to users that cannot be bothered to go and download the latest release from the Internet. We also offer a commercial licence to developers that wish to use TurboCASH to develop add-ons, but do not want to provide these add-ons in an Open Source way. This is a whole new way for us and the next year will show whether we get the take up that we expect to get.


Philip Copeman
MD, Pink Software
Cape Town
6 June 2003