When “Free” upsets your model

Free Beer Here (tomorrow)

Free Beer Here (tomorrow)
( by Tom Morris, from wikipedia )

When something is free (free as in beer, not free as in speech1), how many of us are tempted to over-consume? What if we’re separated from the true cost of something by policy or tradition? Do we find ourselves over-consuming something that is perceived as “free”?

At a previous employer some years ago, we found ourselves having to combat physical server sprawl, that data-center condition in which new servers proliferate faster than old ones are being eliminated. Several factors were at work in this case—the intentional reworking toward multiple development and test instances, and the lack of cooperation between lines of business with similar computing needs and functions are just two—but even these were in part fueled by a larger factor: the perception that the servers producing all this computing power were “free”.

There was no charge-back mechanism in place to transfer the costs back to the LOB—the server budget was centralized years earlier to (successfully) reduce costs by centralizing and aggregating server purchases—and so each LOB became insulated from the cost of the purchases made for them. And “when people are insulated from the cost of a desirable product or service, they use more.”2

So absent a formal charge-back mechanism, we implemented a “tell-back” system.

How much?!!

It’s amazing how quickly behavior could change when we started advertising the true costs of purchasing physical, dedicated, stand-alone systems. With very few exceptions (usually due to high utilization or unique workloads), the response was to implement a virtual server or go into a shared solution. Once your hardware solution no longer felt “free”, it made sense to look at other solutions.

Of course, this created a different problem in that now virtual servers were often considered “free” and we began to see virtual server sprawl. The hidden costs here were largely those in software and OS licensing but could also be seen in administration costs (deployment, patching, maintaining, etc.). Bringing those to the surface and including them in the conversation also changed behavior.

Where else?

Where else do you see people’s behaviors get unbalanced when isolated from the true cost of the product or service? Think about:

  • Interns & Volunteers
  • Condiments & napkins
  • Bandwidth (mobile, etc.)
  • Electricity and water

What about you? Where have you seen the perception of something as “free” messing up an otherwise working model?

  1. See Gratis versus libre and Richard Stallman‘s many thoughts on this.
  2. From WSJ Opinion piece on Medicare utilization, July 11, 2011.
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One Response to When “Free” upsets your model

  1. Paul Hanrahan says:

    In business anything free becomes part of the expense thus cutting into the margin. I have had managers argue with me over the old saying “there is no free lunch.” There really is no free lunch.

    The best example of perceived as free that comes to mind are the hours of the salaried IT professional. What is the real cost of requiring a professional to “do whatever it takes” by “raising the bar” in the name of “continuous improvement” and TQM?

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