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Switching Costs in Software Development

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31–40 of 45 posts

Re: Switching Costs in Software Development

#31
I don't understand the correlation between the opening of the story and AWS vs. GCE at all.

Establishing a long-term dependency on "Scaling R Us" was the problem, not Amazon. If you diversify AWS with GCE so that you have established choices, that's cool -- but "Scaling R Us" is still a problem.

Re: Switching Costs in Software Development

#32
post #25

Amazon has a great service, but when I experiment with things on AWS the cost always seems to end up at $30-$100 to run the experiment on AWS where when I use Google they typically send me a bill for $1.48 or more recently I got a $0.24 bill. It always seems more expensive to even kick the tires on something with AWS versus GCP. Having said that the company I work for now was spending so much on AWS they had to do so…

You could pay for the care and feeding of five developers for that kind of money (including taxes, infrastructure and support costs). Maybe something to consider in future build vs buy decisions.

Also, a company using $75k of Amazon services probably doesn't really care about $75k of expenses per month.

Re: Switching Costs in Software Development

#33

I wish more web services provided opensource versions (Service-as-a-Software). Large orgs would still pay for service contracts even if they self host, and just having the option makes everyone more likely to invest on top of your service.

This is a very good point. Even if you don't want to self-host and you'd rather use a service, having the software available as open source so you can self-host if you so choose, makes it more rational to use the service, because it makes it harder for you to be screwed the way OP's startup was.

Re: Switching Costs in Software Development

#34
post #6

I always wonder why people think the only 'fair' pricing is pricing based on costs. This is not how free markets work.

You are right that pricing on costs is not how it should work. A better pricing would be based on the value created. In this case however the value created correlates to the man hours saved (vs. e.g. managing instances manually without the tool). And since manually managing a large instance is not more work than managing a smaller one, there is no additional value created, so the pricing logic is unreasonable.

Value created has its own sets of problems. Customers with very basic use cases are not entitled to preferential pricing - i.e. Microsoft is not interested in offering big discounts to people who use the Office Suite as a "TV typewritters". Rather they should select a tool that better matches their needs.

On the other side of the spectrum, "value added" can be used as an excuse to charge more money to wealtier customers. Using the same example above, Microsoft should not be able to charge a million dollars for an Excell license that is used by financial wizards to make billion-dollar decisions. The potential is there in the tool, but most of the value added comes from the expertise of the user.

Re: Switching Costs in Software Development

#35

Amazon has a great service, but when I experiment with things on AWS the cost always seems to end up at $30-$100 to run the experiment on AWS where when I use Google they typically send me a bill for $1.48 or more recently I got a $0.24 bill. It always seems more expensive to even kick the tires on something with AWS versus GCP. Having said that the company I work for now was spending so much on AWS they had to do so…

Hi. Can I help you burn your money?

Re: Switching Costs in Software Development

#36

I wish more web services provided opensource versions (Service-as-a-Software). Large orgs would still pay for service contracts even if they self host, and just having the option makes everyone more likely to invest on top of your service.

But you can bet what then most of your customers do, right? This sounds good in theory but is really tough in practice ...

Re: Switching Costs in Software Development

#37
post #13

Amazon has a great service, but when I experiment with things on AWS the cost always seems to end up at $30-$100 to run the experiment on AWS where when I use Google they typically send me a bill for $1.48 or more recently I got a $0.24 bill. It always seems more expensive to even kick the tires on something with AWS versus GCP. Having said that the company I work for now was spending so much on AWS they had to do so…

If you have an MSDN license through your employer, Azure offers $50-150/mo credits depending on license types for dev and test environments. I've never run into issues getting feedback on prototypes in test from real customers, nor have I ever broken through that credit on a single app. Occasionally I'd pass $150 if we were running 3-5 apps simultaneously all with some measurable load but often the "usage" was in the…

[deleted]

Re: Switching Costs in Software Development

#38
post #29

A financial company I used to work for had a legacy software product used by banks, that the banks themselves had estimated would cost something on the order of $50 million to replace. The product licensing fees reflected that fact and it was basically a cash cow for the company.

Ditto. I used to work for a bank and they had this same issue. Requesting changes to the system cost a lot more than was actually involved.

Re: Switching Costs in Software Development

#39

> With all the important things being equal, I choose the service with the much smaller market share and encourage others to do so as well. The problem with this is it increases your risk that the company will simply go out of business, which could be even worse than raising prices 10x as in the example. I think it can also raise risk that the company will significantly change it's pricing model too, they don't want…

This. I'm struggling to remember the right game theory term here, but there's a mismatch between what you want for yourself and what you want others to do. It's great if other people to pick the service with the smaller market share, thereby increasing competition, but you yourself probably want to stick with the larger service because of the various network effects associated with being part of the larger service (e…

https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

Re: Switching Costs in Software Development

#40

I always wonder why people think the only 'fair' pricing is pricing based on costs. This is not how free markets work.

>> I always wonder why people think the only 'fair' pricing is pricing based on costs. This is not how free markets work. In a real free market that is how it should turn out. If someone is charging too high above cost, a competitor will likely step in to grab market share by offering the same thing at a lower cost. Companies go to great lengths to make the playing field uneven - "unfair" practices, unfair employment…

You seem to be suggesting that something unfree is going on here, but in this case there is no evidence for any of the candidate causes that you list. The reality is that the tendency towards commodity pricing is only a tendency, with a highly situation-dependent lag and inertia, even in the absence of more direct restrictions on competition.
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