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Why is selling software so weird?

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Re: Why is selling software so weird?

#21

Post by legalcorrection »

elliotec wrote: post #20
vineyardmike wrote: post #17

Earlier quoted context omitted.

Software still has the lowest marginal cost - the distribution cost is basically 0, unlike things like CDs. And unlike a movie or album, the value that can be extracted via software is much higher. There's tons of make-once sell-lots products, but you need factories and supply chains and all that crap, not just a cat6 connection. If you want to serve more customers, you need to buy more CDs. Streaming is better for c…

> the distribution cost is basically 0 How do you figure? Surely you know the magnitude of ad spend on software products, not to mention hosting and scaling infrastructure. We're not shipping cd's to every mailbox anymore but a typical marketing budget + Heroku/AWS cost is likely far higher for a typical growth SAAS startup than AOL was dumping on their physical distribution methods in the early 2000s right?

Marketing is not a distribution cost.

Re: Why is selling software so weird?

#22

Post by seizethecheese »

elliotec wrote: post #20
vineyardmike wrote: post #17

Earlier quoted context omitted.

Software still has the lowest marginal cost - the distribution cost is basically 0, unlike things like CDs. And unlike a movie or album, the value that can be extracted via software is much higher. There's tons of make-once sell-lots products, but you need factories and supply chains and all that crap, not just a cat6 connection. If you want to serve more customers, you need to buy more CDs. Streaming is better for c…

> the distribution cost is basically 0 How do you figure? Surely you know the magnitude of ad spend on software products, not to mention hosting and scaling infrastructure. We're not shipping cd's to every mailbox anymore but a typical marketing budget + Heroku/AWS cost is likely far higher for a typical growth SAAS startup than AOL was dumping on their physical distribution methods in the early 2000s right?

“Basically” is doing a lot of legwork, but yeah it’s a lot cheaper than almost anything else

Re: Why is selling software so weird?

#23

Post by WJW »

usr1106 wrote: post #19

Software is very close to math. Most people would agree that math should not be sold or licensed. How to add numbers is not something that should be paid for. If actually someone made their living by adding numbers we would probably agree they should be paid. So the programmer should be paid, the hardware should be paid, but the software not? Doesn't seem to work. Exactly like people expect everything to be free on t…

Since everybody learns basic math in school these days it has ceased to be something you can really charge for, similar to how it would be very difficult to charge for a software package that only copies files on a single computer or something like that. Applied math absolutely gets paid for, but it is a far cry from "adding numbers". Think new optimization techniques for a factory logistics package and things like that.

Re: Why is selling software so weird?

#24

Post by murukesh_s »

jsiaajdsdaa wrote: post #2

It's because the hardest parts of software involve connecting with other systems and soliciting your custom requirements. Imagine if you wanted to buy a custom car, but you wanted an "off the shelf from walmart" experience. "Hello, I'd like to buy a custom car." "Ok great, we have many over there." "Yes but you don't have any pink ones with cool designs" "Well, we could make you a pink one, but what design would you…

>"Hello, I'd like to buy a custom car."

How did you even get that Qs coming? For a bootstrapped startup selling to enterprises figuring that out itself is half the battle

Re: Why is selling software so weird?

#25

Post by bni »

A lot of software (most?) don't have zero marginal cost.

Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them.

The real business is doing this by charging per hour to do those customisations. The base software is more or less a made up marketing story to be able to get a foothold. The most successful and established companies can charge a large up front fee (license).

Re: Why is selling software so weird?

#26

Post by jiri »

bni wrote: post #25

A lot of software (most?) don't have zero marginal cost. Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. The real business is doing this by charging per hour to do those customisations. The base software is more or less a made up marketing story to be able to get a foothold. The most successful and established companies can charge a large up front fe…

I agree but I am thinking this might be result of "being able to charge customer" approach. This model may be easiest way to charge every customer instead of haggle with customers with pay for base software which price is (f.e. wordpress) or often quickly falls to zero. More optimal way to create such software would be without customisations, but you cant do that cause you cant charge enough.

Re: Why is selling software so weird?

#28

Post by gumby »

vineyardmike wrote: post #17
paxys wrote: post #11

While all of this is mostly true, this problem isn't unique to software by a mile. The model of high fixed cost, low marginal cost applies to pretty much every consumer good or service sold in the industrial age. If you think publishing the first copy of a piece of software is hard, try setting up a new production line in a factory, or opening a restaurant, or producing a music album or movie. Yes it is hard to break…

Software still has the lowest marginal cost - the distribution cost is basically 0, unlike things like CDs. And unlike a movie or album, the value that can be extracted via software is much higher. There's tons of make-once sell-lots products, but you need factories and supply chains and all that crap, not just a cat6 connection. If you want to serve more customers, you need to buy more CDs. Streaming is better for c…

> Software still has the lowest marginal cost...

I invite you to switch sectors to the pharma world. I worked on a program for a drug planned to be sold at $2,000/dose with a projected cost of $0.0025/dose. That figure included amortization for all the manufacturing equipment, QC etc and raw materials.

Re: Why is selling software so weird?

#29

Post by ihateolives »

bni wrote: post #25

A lot of software (most?) don't have zero marginal cost. Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. The real business is doing this by charging per hour to do those customisations. The base software is more or less a made up marketing story to be able to get a foothold. The most successful and established companies can charge a large up front fe…

> Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them.

Meanwhile Adobe just rakes in 10-50$ per month on Creative Suite plan subscriptions from individuals and small businesses all over the world who are happy just to get access to the software.

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