Two interesting articles that share a common theme – the expected value from buying software.

In The Future of Enterprise Software – I am so scared, I am so excited, Chris Balavessov writes about how Waste Management is suing SAP after purchasing a $100m system that failed to work as demonstrated. Apparently, SAP have already admitted the demonstration used to sell the software contained smoke-and-mirrors that were not part of what was being sold to Waste Management. It’s about time somebody questioned the value in some of these expensive deals. Countless organisations spend millions upon millions of dollars on ‘enterprise resource management’ and friends, only to still end up running the business out of spreadsheets. The closing comment from the article:

More so than ever, the time is coming for companies that build it right and do it right to prosper while the ones that exclusively focus on just selling it right and who-cares-what-happens-after-the-deal-closes to stare at a lacklustre or flat revenue curve. Because you really can’t fool all the people all the time.

Hear hear! Smoke-and-mirrors demonstrations wow customers into thinking certain aspects of technology are easier to set-up and use than they actually are. There is often little discussion about the hidden elements (often complex and often dependent on people and information) required to achieve what you see.

In an Interview with Donald Knuth, by Andrew Binstock, they discuss the benefits of open source programming. Whilst I don’t share Donald’s confidence about open source as a dominant business model in the future for writing software, I do agree with his take on how and when we will choose to pay for software:

I believe that open-source programs will begin to be completely dominant as the economy moves more and more from products towards services…Yet I think that a few programs, such as Adobe Photoshop, will always be superior… I’m quite willing to pay good money for really good software, if I believe that it has been produced by the best programmers

I think Apple’s iPhone is the latest example of when people will be more than happy to pay a premium for a product regardless of how cheap similar alternatives may be. Because Apple has established a brand and reputation around being ‘best of breed’ in terms of design and usability of their products. If you don’t want best-of-breed, then the preferred alternative usually sits at the opposite end of the scale – free products that deliver good-enough capabilities. To borrow a style from the old Creating Passionate Users blog, it’s the classic love/hate split where being in the middle = mediocrity = satisfying nobody and going nowhere.

Demand Curve

Regardless of cost, products need to either be very good or just good enough. People will happily jump from free to expensive (and vice versa) when the conditions are right. They rarely move linearly through the range of options. Expensive doesn’t guarantee being very good but we anticipate that cheaper means lower quality. Being average and cheap is not a successful strategy in a market where good enough is available for free. Ditto for being expensive and failing to deliver.

Technorati tag: Software Economics


Join the conversation! 2 Comments

  1. I think you may be unduly cynical about open source; FF and MySQL are but two examples of huge successes, and it seems to me that any area of 'mass usage' is likely to move toward open source, some faster than others.I strongly recommend Matt Asay's blog; he's a dyed in the wool fanatic, but also offers some seriously thought-provoking views.It's at

  2. You're quite right to point out Firefox and MySQL as great examples of successful open source projects.Where I am perhaps cynical is the assumption that a switch from software to services will automatically correlate to a switch from closed to open source software development. I think open APIs are an absolute requirement for any platform to succeed. But open APIs can be used to create software and services using both open and closed source methods.Some scenarios are better suited to open collaboration and others are better suited to closed development. I think the two approaches can co-exist and hopefully neither will become dominant.Many thanks for your comment and the link – already checking it out.

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