"It's tough to compete in an industry where your customers expect your product to be free. Such is the case with software, where giveaways have seemingly become the norm. (Try selling a Web browser or an audio player in 2010.) Some developers have turned to advertising to underwrite their efforts. More recently, a few software vendors have begun offering Internet services as a way to add value to their products and raise revenue. But the latter model is not without its pitfalls.

"Take Canonical, for example. The company behind the Ubuntu Linux distribution now offers cloud-based data synchronization services under the Ubuntu One brand. You can get 2GB of storage for free; $10 per month gets you 50GB. Soon Canonical will be expanding its offering to include contact synchronization for smartphones -- also for a fee -- and an Ubuntu One Music Store as a Linux-based competitor to iTunes.

"These are bold moves, to be sure. Canonical seems to be borrowing a page from Microsoft's playbook, where "software plus services" is the new mantra. But there's just one problem: For a small company whose core competency is software development, an online service-based business is a whole new ballgame. Software vendors who hope to follow in Canonical's footsteps should tread carefully."