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Switching Costs in Software Development

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Re: Switching Costs in Software Development

#41

Post by anonymoushn »

nickbauman wrote: post #11

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…

When I tried out the AWS free trial thing, they had some issue where EC2 instances would become totally unreachable within minutes of being created. Support asked me to leave some bugged instances running so they could investigate. Then I was billed for these instances. I asked for a refund, but Amazon says they have no record of the charges, even though I can see them in my Amazon account.

Great.

Re: Switching Costs in Software Development

#42

Post by _Codemonkeyism »

phkahler wrote: post #21
_Codemonkeyism wrote: post #2

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…

"In a real free market, everything tends toward commodity pricing."

No.

This assumes people only buy products based on price and would choose cheaper alternatives.

Doesn't look like this to me, e.g. I'm a consultant, I base my pricing on value not cost (what is my cost anyway?) and people pay on value. Other consultants are not undercutting my prices, for various reasons, e.g. because reducing prices would diminish value perception. I'm not a commodity and never will be (perhaps if AI makes great leaps forward).

Same happens with Apple devices which are far from cost based pricing. Assuming others have the same product - I don't want to get into quality, brand recognition etc. just pretend - if they base their products on cost and undercut Apple, they would move out of the luxury/premium segment. One could argue Apple pricing is high because of an 'Apple monopoly on Apple devices', but the same works for any premium segment (Nike and Adidas premium shoes for example).

Beside the premium argument there are other examples where "In a real free market, not everything tends towards commodity pricing" - in particular only commodities do.

(Interesting side note: Read about value maps, evolution of products towards commodities and strategies from Simon Wardley)

Re: Switching Costs in Software Development

#43

Post by phkahler »

_Codemonkeyism wrote: post #42
phkahler wrote: post #21

Earlier quoted context omitted.

>> 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…

"In a real free market, everything tends toward commodity pricing." No. This assumes people only buy products based on price and would choose cheaper alternatives. Doesn't look like this to me, e.g. I'm a consultant, I base my pricing on value not cost (what is my cost anyway?) and people pay on value. Other consultants are not undercutting my prices, for various reasons, e.g. because reducing prices would diminish v…

>> I'm not a commodity and never will be

Consultants can be somewhat specialized and can have high demand. Gold is a commodity, but scarcity (or perceived scarcity) makes it higher priced than other metals. If there weren't as many consultants out there, you might be able to charge even more.

Android is a cheaper alternative to iPhone, as is Nokia. You are correct that there are other factors at play that make the situation less like a commodity market. Copyrights and patents - both government sanctioned monopolies - are the primary thing enabling Apples high prices. That's not to say I'm against those things, just pointing to the real reason for what's going on.

Re: Switching Costs in Software Development

#44

Post by _Codemonkeyism »

phkahler wrote: post #43
_Codemonkeyism wrote: post #42

Earlier quoted context omitted.

"In a real free market, everything tends toward commodity pricing." No. This assumes people only buy products based on price and would choose cheaper alternatives. Doesn't look like this to me, e.g. I'm a consultant, I base my pricing on value not cost (what is my cost anyway?) and people pay on value. Other consultants are not undercutting my prices, for various reasons, e.g. because reducing prices would diminish v…

>> I'm not a commodity and never will be Consultants can be somewhat specialized and can have high demand. Gold is a commodity, but scarcity (or perceived scarcity) makes it higher priced than other metals. If there weren't as many consultants out there, you might be able to charge even more. Android is a cheaper alternative to iPhone, as is Nokia. You are correct that there are other factors at play that make the si…

No.

Brand is the primary thing enabling Apples high prices.

Re: Switching Costs in Software Development

#45

Post by phkahler »

_Codemonkeyism wrote: post #44
phkahler wrote: post #43

Earlier quoted context omitted.

>> I'm not a commodity and never will be Consultants can be somewhat specialized and can have high demand. Gold is a commodity, but scarcity (or perceived scarcity) makes it higher priced than other metals. If there weren't as many consultants out there, you might be able to charge even more. Android is a cheaper alternative to iPhone, as is Nokia. You are correct that there are other factors at play that make the si…

No. Brand is the primary thing enabling Apples high prices.

>> Brand is the primary thing enabling Apples high prices.

Trademarks are another government enforced monopoly.

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