'Free' business model required for wide-spread acceptance?

In today's world is it a requirement for any software solution to be "free" to be able to achieve widespread acceptance/usage around the world?

Definitely not!!!

There are millions of paid software that are more successful than free software that is almost as good as the paid software.

Examples:

• Photoshop vs. GIMP
• Microsoft Office vs. Openoffice (See "Responses to comments" below)
• Microsoft Visual Studio vs. Microsoft Visual Studio Express (Express may be used a lot, but both are successful.)

Most likely you've only heard about the paid version. It doesn't really depend on the price, whether free or not, if it's reasonable. Why do some iPhone App developers make so much money? It's because they have an App that people want to buy, and although you have to pay for it, it's a reasonable price, and people buy it.

Conclusion: It definitely is not required to be free to used a lot and popular. Either way, as long as you have a good product, good marketing, and good reviews, customers will still find and use your product whichever way you go. If you want to "lure" your customers into buying a paid version, there is always free trials. That way they can find out how good (Or bad :P) your software is, and they'll realise after it's over that they like it and they'll be more likely to buy than if they use your basic features for about the same time and think less of your software. (This information is not backed by facts, but it seems pretty logical). There is no "universal standard" on which is better, and I don't know your situation.

One thing to note is some customers may be annoyed if they install your product thinking it's free but then have to pay, uninstall, and install the new version, and would be much happier if you told them upfront about the fees and let them buy it.* *

Responses to comments: "...the third example is an example isn't truly free vs. paid, but is an example of the Freemium model." I think not many software companies would dare ever using Express (although I've never worked in one, but it does have more collaboration tools), and many hobbyists who use Express would never pay $400+ to get extensions and collaboration tools when they work alone. Express makes even the cheapest paid version "exclusive" and professional. Yes, in the end it may convert some people, but that isn't the way it works always.

"Your first two examples are not great as the paid offering was first to market and built dominance and their brand making it much harder for a paid competitor to make any significant impact." Yes, OpenOffice is 11 years old and MS is 22 years old. But GIMP is 17 years and Photoshop is 23 years, which is only a difference 6 years. GIMP 73% of the time Photoshop did to work on it. Plus, open source software can possibly have more developers than closed source software. Linux can get a patch within hours, but Windows takes weeks for it to be discovered, patched, and pushed out to users.

Your question is a bit vague - first and foremost, it depends on your target market. Is your business B To B or B To C? Software solutions developed for enterprises usually involve business models that are dependent on product licencing. A company will pay for a license to use a piece of software, and this product can achieve widespread usage. It's not as common to see software being developed for companies that operate on models other than licensing.

For software developed for consumers, there are a variety of options to choose from. Of course, a simple licensing approach would have a similar effect, but we see plenty of companies using advertisements and freemium monetization models to eliminate the barrier of entry to the product, while maintaining features that can draw in revenue.

I would recommend that you do a thorough analysis of whatever niche you're interested in, looking at competitors' approaches before deciding for yourself what the best business model is. This answer is highly variable and dependent on the field and market.