There is no technical explanation. It's purely for business reasons. This limitation seems artificial, but it's no different from any other software product that comes in multiple editions:

A software company (e.g. Adobe, IBM, Oracle, Apple, Microsoft) develops a software product; when the product is ready to ship, they call it "[Product Name] Professional Edition". Then the company cripples the product a bit (sometimes by deleting a few lines of code that enable important functionality) and calls that version "Standard Edition". Then they cripple it even more and call that version "Starter Edition".

All they are doing is manipulating bits to give people an incentive to pay top dollar, just as Microsoft did. Giving everyone the full functionality wouldn't cost them any more, since it's all just extra bits, which cost the company $0 to copy (actually, they need to spend millions of dollars building, testing and maintaining these crippled editions, so they would actually save on costs if they didn't cripple the software). I understand that what Microsoft is doing with the 32 GB limitation feels different and ridiculous, but it really isn't.

Right. For example, if a totally hypothetical individual developed a collaborative knowledge-base system and offered it as a service, they might decide to arbitrarily segment the market based on page views.

Now, one might make the argument that there is actually a cost associated with page views whereas there is not a cost with having your software recognize all the memory on a third party's machine, but just between us businessmen we can agree that that is malarky. For one, the cost of a marginal pageview is too small to be measured but the price to the customer of that page view is about ten thousand dollars in the first year if it was their millionth-and-first page view in January. For another, the cost the 9 million page views separating tier #2 of the hypothetical service from tier #1 is far, far less than the pricing differential.

Consider the basecamp $99 plan vs the basecamp $49 plan:

100 projects / 35 projects vs. 20 GB storage / 10 GB storage

Do you really believe those extra 10 GB and 65 projects cost 37signals $50 a month to deliver to you?

Similarly, do you really believe that the cost of supporting 48 GB of memory versus 32 GB cost Microsoft $1000 per customer to build?

Wolf in sheep's clothing, exact same concept with Web 2.0 patina. Rich customers pay more.

Anyway, my argument isn't really about the money, but the mental friction. I'm sick of dealing with marketing weasel feature matrices

Do you really believe those extra 10 GB and 65 projects cost 37signals $50 a month to deliver to you?

No, I don't. What I said was "they offer different plans whose prices probably don't scale linearly with the costs behind them (in other words, they don't get the same profit across plans)". I acknowledged that the price is not a linear function of the costs and that they get more profit from more expensive plans. My question was "why is that evil?"

Similarly, do you really believe that the cost of supporting 48 GB of memory versus 32 GB cost Microsoft $1000 per customer to build?

I'm sorry if I sound hostile, Jeff, but I read your post before commenting on it -- did you read my comment before replying? I said that the artificial memory limitation is completely ridiculous (unless there's a valid technical reason for it). As I explicitly state in my other comments, I believe that's unethical.

Here's the summary of what I believe, a Cliffs Notes edition of my comments: Having rich customers pay more is not unethical, crippling the features of your product to extort money is.

I'm sick of dealing with marketing weasel feature matrices

This line would be funnier if there were an ironic marker or perhaps some indication that it was self-deprecating humor. As it is, it sort of sounds like you mean what you're saying. Which would be... interesting in light of your own business model, announced like two days ago.

http://www.stackexchange.com/

http://blogs.sun.com/bmc/date/20040828#the_economics_of_soft...

Amusingly, it looks like he'll be an Oracle employee since they are now buying Sun.

(Note, this is "just business" as far as I'm concerned, i.e. about .7 on the weasel scale. What saddens me is organisations too short-sighted or misinformed to see the trap they are lumbering into as they are too distracted by salesmen with slick powerpoints, particularly if they are governments wasting my tax dollars)

Alright, I can come up with a reasonable explanation:

For databases and servers a lot of bugs and corner cases are only hit by servers that get loads and loads of traffic. Fixing those bugs cost a significant amount of money. By charging more to the high-traffic servers the cost of fixing those bugs can be justified.

It is also fair, in a sense, because only the high throughput servers really benefit from the extensive testing and stability, so why shouldn't they be the ones to pay for the fixes?

Perhaps avoiding customer anger is reason enough to avoid arbitrary limitations.

All the same price ($0), but you have to think, which was Jeff's point. And you have to think more than for Windows. It's the blessing+curse of diversity.

Consequence or not, how can it not be an advantage?

Like I said, market segmentation in software does not necessarily have to be a bad thing. Consider a hypothetical text editor that comes in two editions. The "basic" edition has features like syntax highlighting, regex search and replace, etc. The "advanced" edition has a feature that allows you to open and save files not just locally, but also via SFTP. When it was first written, the editor didn't have the SFTP feature, the author developed it because there were some users who asked for it; they weren't the majority, but the author thought the idea was nice. Instead of incorporating that feature into the one and only edition, the author decided to offer two editions: a cheaper "basic" and a more expensive "advanced" edition. It was the author's idea of placing value on the effort involved in writing the SFTP feature. The majority of users can go on happily using the "basic" edition without paying extra for it, while those who really want SFTP can pay for it.

One way of looking at this market segmentation is to say that the author was greedy and imposed an artificial limitation on one of the editions in his product. Another way of looking at it is to say that the author offers two products that satisfy different needs at different costs. If we were talking about two products from two different authors, we would be comparing their features and prices quite naturally, without complaining about market segmentation.

However, when you're offering exactly the same product, with no differences, for two different prices, then you're just being greedy and taking advantage of your customers (which is something commonplace nowadays and most people, myself included, just accept it). Close to that is the situation in which you slap a truly artificial restriction on a cheaper edition of your product, not through a lack of feature, but through a deliberate crippling of that feature (e.g. the five-dollar edition can open only up to 3 files). The exception, of course, is a crippled free edition which allows potential customers to try your product before deciding whether to buy it. In that case, you're just being annoying ;)

That, in summary, is why I believe that market segmentation is an advantage, within certain ethical bounds.

In your text editor example, the author can add an SFTP feature, but once it's coded it's coded. There's no extra cost to ship out all software with that feature after it's coded, except perhaps some extra support costs. (I imagine those would be pretty minimal.) At that point, I only see two reasons to segment the market from the users' perspective:

1) To not confuse your less advanced users with more features. This is a pretty weak reason, IMO. 2) To make sure that the people who actually wanted the feature are the ones paying for it. After the cost of development is paid for, this reason goes away.

Beyond these reasons (unless I'm missing something, which is entirely possible), releasing different grades of software just hurts your users. It makes you more money, though, so maybe that's enough justification.

I suppose that the author could let users drive new features by making a list of proposed features and having users donate money towards the implementation of those features. I'm pretty sure I've seen that somewhere. But the segmentation seems to be the easier way.

Going back to the editor example, suppose you have two editors from two different authors; one is cheaper, the other has SFTP feature. The author of the one with the SFTP features put a higher price on the overall development effort than the author of the cheaper one. And he's charging you more than the other author per every copy, even though he coded it only once. Why is this so drastically different from having two editions of the same product from the same author?

To take your logic a step further, why is the author charging money for every copy? Once he coded the whole product, it's done and there are no per-unit shipping or manufacturing costs. The alternative would be to somehow get the money, upfront, that would cover the development costs and net him some fixed profit for it. Who knows, maybe if we could switch to that business model piracy would no longer be an issue. But until then, as long as charging per unit of software is accepted practice, I don't see a difference between two editions of the same product and two products with different features. (And I'm not talking about unscrupulous feature crippling here, that's different)

By this logic, Chipmaker should only sell their most powerful processors, because the actual manufacturing-cost is not really the reason for the price difference between a top of the line i7 processor and a different one with lower specs.

You can look at it from a different angle: Let's say you have a powerful program and you are charging 1000$ for it (e.g. Photoshop). Your market research has shown that a lot of "casual user" are looking for a product like the one you are selling, but are not willing to pay the 1000$. So you develop a version without the more advanced functions and sell it for 200$ (e.g. Photoshop Elements).

It's not really about "not confusing the user", but about offering another option. How does this hurt the consumer?

The posts are more and more noisy, pointless and irrelevant. It looks as if he's forcing to write an entry regularly, even when he's got nothing to say.

You can always sum up a post as "X is very bad except when it's not" or "Y is very good except when it's not".

However, this might be not true for dual-licensed software.