This differential pricing helps satisfy demand (like student movie tickets). Most of the poor students/startups could not afford to buy anyway, so you lose little by giving it away.
But you gain potential customers, like MacDonalds targetting children: "get 'em while they're young [and poor]". Lock-in is stronger with software: UI familiarity (e.g. vi vs. emacs); data on their server.
If you had a dominant market position, this differential pricing can help a scorched-earth policy: by denying no-one, you don't start the seeds of copy-cat competitors - they have no fuel to burn (i.e. no customers, no interest). The danger with copy-cat competitors is that as they grow, they often differentiate into genuine alternatives in their own right. Better to nip 'em in the bud (or not enable the bud to grow in the first place).
Joel isn't in that position (there are several bug-trackers): here, it's just an earlier arena for the fight for customers (like employers interviewing earlier and earlier at university). For example, the Jira people offer free products for open source projects.
The above is a business interpretation, based on cynical self-interest, but I think the result is healthy: customers get high-quality yet affordable products; you get customers - to each according to his need; from each according to his ability (to pay). Meeting needs is a good thing.
But for customers, it's just as important to evaluate what they are getting, even though it's free. Otherwise, you watch free TV, browse free websites, and buy supermarket "specials" without making a decision about what you're really buying. You might have chosen to buy it anyway; you might not.
There are vulnerabilities with hosted data; e.g. if Joel had to change his policy, how would customers get their data out? These are questions common to all vendors, and it's not just because it's free - it's just then when it's free, it's easier to not consider these questions properly. It's up to customers to do their due diligence. All Joel can do is work hard to create something useful, and let you know about it. He can't tell if it's right for you and your specific needs or not.
Note: I think it's great Joel is doing this, and it's beneficial all round.
To the point about getting your data out. FogBugz On Demand lets you download a snapshot of your database, at any time, in three different formats: MS SQL Server, Access, and MySQL. The FogBugz database schema is open and fully documented here: http://www.fogcreek.com/FogBugz/KB/dbsetup/FogBugzSchema.htm...
But you gain potential customers, like MacDonalds targetting children: "get 'em while they're young [and poor]". Lock-in is stronger with software: UI familiarity (e.g. vi vs. emacs); data on their server.
If you had a dominant market position, this differential pricing can help a scorched-earth policy: by denying no-one, you don't start the seeds of copy-cat competitors - they have no fuel to burn (i.e. no customers, no interest). The danger with copy-cat competitors is that as they grow, they often differentiate into genuine alternatives in their own right. Better to nip 'em in the bud (or not enable the bud to grow in the first place).
Joel isn't in that position (there are several bug-trackers): here, it's just an earlier arena for the fight for customers (like employers interviewing earlier and earlier at university). For example, the Jira people offer free products for open source projects.
The above is a business interpretation, based on cynical self-interest, but I think the result is healthy: customers get high-quality yet affordable products; you get customers - to each according to his need; from each according to his ability (to pay). Meeting needs is a good thing.
But for customers, it's just as important to evaluate what they are getting, even though it's free. Otherwise, you watch free TV, browse free websites, and buy supermarket "specials" without making a decision about what you're really buying. You might have chosen to buy it anyway; you might not.
There are vulnerabilities with hosted data; e.g. if Joel had to change his policy, how would customers get their data out? These are questions common to all vendors, and it's not just because it's free - it's just then when it's free, it's easier to not consider these questions properly. It's up to customers to do their due diligence. All Joel can do is work hard to create something useful, and let you know about it. He can't tell if it's right for you and your specific needs or not.
Note: I think it's great Joel is doing this, and it's beneficial all round.