As soon as you see the word "Free" you autmatically ask "where is the catch?". Generally there is always a catch and this catch is essentially 1 of 3.
Catch 1 - The software itself is a diluted version of the paid for version. Many vendors offer a "lite" version of their software to get you hooked. This is very true with CRM and Accounting software. Examples of this include Zoho.com and Salesforce.com. Both equally good CRM tools but the free versions limit functionality and users. Whilst you may be quite hapy with the limited users and the basic functionality the paid for version does have much more and then one begins to look at return on investment. My experience with the free version of these products is frsutration, I get to a stage where I want to say run a campaign and track it but realise the free version does not support this. Both brilliant tools as I say and the marketers know exactly how to get you to buy the fuller versions.
Catch 2 - No support. Support on any product is essential. Support on many free products is either non-exisitent or very restricted. For this look at the anti-virus industry. AVG, among the most well known of the so-called FREE Antivirus products has a great free product but with it comes limited support and an element of catch 1 with reduced functionality (buy the product and get...). This is why a paid for security product such as Sophos makes a better invesment. One needs to think how much support and service actually costs. I often say how much support can you buy for $1 per year?
Catch 3 - License restrictions. How many of you realise that AVG free is for personal use only? How many of you use it for free in your business? License restrictions are common on many free products. Be careful, often a fine for using free software outside of the license restraints is a great deal more than buying the software.
So FREE Software or paid for Software?
My opinion is always to go for paid for software. The choice of course is yours. Remember there is a n such thing as FREE in this life!

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