It's the other way around: if my business is making furniture and the company made a scheduling program I'm better off spinning it out to someone who will focus on it, and just continue to use the product. So instead of it being just a cost center the company gets a bit of possible financial upside and hopefully the product becomes better via market exposure.
Of course Coase would say that's a risky bet (the spun out business could fail for ordinary business reasons and then you'd have nothing).
If that scheduling program is proprietary and a significant competitive advantage to your particular furniture making business, you may prefer to pay the higher cost to keep it internal.
The problem is that many companies incorrectly make that exact judgment, assuming that their competitors are, on average, buffoons.
>Of course Coase would say that's a risky bet (the spun out business could fail for ordinary business reasons and then you'd have nothing).
But if you've spun it off, and especially if you got in outside investors, you've both partly cashed in and largely hedged yourself against that risk. Now you can just treat them as an external vendor and if they fail, buy elsewhere.
If you can't buy elsewhere, and don't care about keeping the software internal as your unique selling point, arguably the right thing to do is to open source it. That way you make sure it stays around, and attract third parties to support it. But there's also a lot of internal software around that wouldn't yield any benefit from either spinning off a profit-seeking business to commercialize it, or open sourcing.
> The right thing to do is whatever makes the most of your investment.
Right. And if there are no alternatives on the market already, that tells you that charging for it is not going to be viable. The way to make the most of that investment is to keep it alive, even if this means giving stuff away!
Releasing things usually comes with overhead - you have to verify that everything you're releasing doesn't have anything proprietary, that all other code is following a license that allows for release, etc.
Or you could spend $0 and let the bits just rot if they're not in use - no lawyers reviewing licenses, no code reviews, nothing. Or you could send it through engineering to make sure there's no secret sauce, then through corporate legal (at $250/hour), then through business development...
It's almost always better to just smother the code with a pillow than it is to give it away, because giving it away actually costs money, and will bring you no profit. Screw that, if it's important enough, let someone else spend the time and money writing it.
> ...It's almost always better to just smother the code with a pillow than it is to give it away
Sure, but the underlying play is that clearing the code for release will at least allow you to share support costs with other actors in the same or closely-related industries. In many ways, it's a marginal choice that sits awkwardly inbetween "smother it with a pillow" and "make it a full-blown proprietary product that can actually bring sizeable revenue". That doesn't mean it cannot work in some cases.
Well, how long is a piece of string? There could be a million reasons, depending why the product failed. Maybe a competitor came in and wiped out their market. Maybe, maybe. I'm just saying spinning it off doesn't have to be a source of increased risk and can be a way to hedge risk.
Ronald Coase, who kind of invented the field about "the theory of the firm", asked in his 1937 paper "Nature of the Firm" why companies exists basically.
If you, as Coase did, generally believe that markets are efficient it is not obvious why companies form where the effect of the free market is basically removed inside of the firm. Inside each firm some kind of technocracy/meritocracy rule instead, and resources are not allocated in the same way as outside the firm. If we believe that the free market is the best way to price and allocate a resource (say steel or something), we don't we use the free market to price and allocate resources inside the firm (say workers or machine capacity in a car plant)?
Of course he talks about things that we now consider "transaction cost", it would be a pain in the butt to outsource everything and do nothing "in house". But another reason he talks about is the risk of your subcontractor going out of business.
So to loop back to the question here, if the software is sold to another company which we then buy the services form, we have the risk that the company could fail and we would be without our services.
Of course Coase would say that's a risky bet (the spun out business could fail for ordinary business reasons and then you'd have nothing).