Is the business model of the future one where the customer no longer pays? This is the idea put forward in a new book by Chris Anderson. We explore his ideas in our market update this month and the implications for e-learning.
Chris Anderson, editor of Wired and author of The Long Tail, is at it again. His new book's entitled Free: The Future of a Radical Price. The core of the book is based on an article he wrote for Wired magazine. The book is not available until next month (you can pre-order here, um, not for free...) but as part of the pre-publicity he has been doing a round of interviews. We can’t wait to get the book but we have been looking at what he has to say so far.
Scared of 'free'? Don't be
Anderson argues that previously people have been suspicious of 'free' and generally they have been right to think this way. Most business models so far tend to mean that somewhere along the line, somebody is going to have to pay. But this, he says, is set to change.
Anderson argues in the digital world, very few paying customers can subsidise everybody else. He writes:
"The new form of cross-subsidy is one where a tiny minority of people who really appreciate the product, really get value from it, can subsidise everybody else, because the underlying cost of doing things online, in digital, is so low that you can give away 90% of it for free."
For example, open-source computer software is free to users who can then alter and build upon the system, as long as they make it freely available to everyone else. One of the best known examples of this is the Linux operating system. Initially, open-source software was developed by hobbyists and amateurs, but now companies such as IBM actually pay engineers to create free software.
"What they are creating is a platform around which you can add value, you can create services, you can create other software, you can sell hardware perhaps", Anderson argues.
The idea is to offer the majority of potential consumers something free which a minority are paying for by purchasing other add-on services. He calls this the "freemium" model and compares this to the spray of perfume given away free in the department store to encourage customers to buy a whole bottle. One per cent of the product is given away free in order to sell 99%. In the digital world, however, the opposite applies, "you give away 99% to sell 1%," he says.
There seems little doubt that the business models in the online world are changing. Forrester’s April 2009 report “Open Source Software Goes Mainstream” questioned 2000 software decision makers - are they wasting billions on commercial solutions, when the best things in life are, um, what's the word? The report concluded that open source has risen to the top of the executive agenda, with the author noting “the mandates are coming from higher up” and that many bosses are now demanding “faster, cheaper, better”.
What are the implications for e-learning?
So are we going to see “Freemium” services in the e-learning world? We take a quick look at e-learning content, authoring tools, learning management systems, virtual classrooms and custom e-learning.
Free e-learning content?
MIT and Open Learn already provide free structured content and you have all the content that is freely available on Google, YouTube and Wikipedia. Will there be free e-learning modules? We are already seeing people share content in the public sector but it will be interesting to see if anyone decides to start giving away geneic content. We think it is probably just a matter of time. There is probably also scope to make it open source so that people can add to the content with a tool (see below). Probability - Very High.
Free authoring tools?
There are already great free tools such as Audacity, GIMP and others to help you create image and audio assets for your e-learning. There are some full authoring tools that are free or nearly free, such as eXe and Udutu and it will be interesting to see if others emerge in the next few years or if companies that own an authoring tool create an open source version and charge for premium services. Probability - High.
Already happening. There is already a great choice of open source Learning Management Systems available, the most popular is Moodle LMS, now used by over 18% of all corporations in the US. We think that it's going to become the 'why not' question when it comes to LMS procurement - people will start getting intro trouble for not considering an open source LMS. We have long stated our view that the future of learning management systems is open source. Open source doesn't mean no cost, as you will still have to install, host and support your LMS but it does mean substantially lower costs and no license fees. Probability - reality right now.
Free virtual classroom?
Where have you been? There are a number on the market already including DimDim. Does everything the others do, except you can download and run on your own servers. Need a demo of DimDim? Just call us and we will set one up for you. There is a cost to host your classroom sessions but this is significantly lower than the costs of running a proprietary system. Alternatively you can now simply share your screen using Skype and use the Skype teleconferencing and chat room for free. Probability - reality right now.
Free custom e-learning?
Our apologies, we hate to disappoint but we don’t yet see the free model for custom e-learning but as Meatloaf might have said, 4 out of 5 ain't bad. (He also said "I'll do anything for love, but I won't do that" - we assume he was referring to developing custom e-learning for free but was unavilable at time of publication to confirm). Also the free advances in the other areas should all be combining to reduce your overall e-learning costs and you should be seeing your providers reflecting this in their pricing. If you are not seeing reduced e-learning costs you are talking to the wrong companies. We guess the closest you're going to get is if organizations pull together to share development costs for modules that reflect a shared need - but then it's not really custom any more. We've talked about this idea before and have yet to see that happen in the corporate market - seems most organizations are still prepared to pay for a truly custom e-learning experience. And if you're going to spend, that's the place to spend it - and not on the LMS and other tools which you can get for next to nothing.
So in the future maybe not everything will be free, but we expect to see some significant changes in business models and an increased move to free stuff. That's good news for your budget any day - great news during challenging times like these. >