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Why is selling software so weird?

zeptonaut.com

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Re: Why is selling software so weird?

#71

Post by syl_sau »

simonh wrote: post #47
syl_sau wrote: post #39

I'd predicate the answer to this question on a much more materialistic basis than the author : it's weird to sell software because it's doesn't really exist. I mean, it's barely tangible. You can copy it indefinitely. It doesn't exist physically. It's much more natural really to buy, say, a painting or a house. You can hang it, see it, use it. You have exactly one house, exactly one of this painting. Software, compar…

How is that different from music, TV, movies. Is entertainment a real thing? What about education, is that a tangible commodity? That's the kind of thinking that lead Marx to his theory of value, and his belief in the parasitic nature of all economic activities except for making physical things.

Concerts and plays are a real things that happen in the real world. So is teaching. They don't exist in a virtual space where everything is duplicable ad infinitum and where the next machine is just as capable as the first. Do you pay for music and movies on the internet? I don't, and most people do not directly. They go through platforms because otherwise people just avoid paying for them. Copyright and the Internet are kind of conflictual by nature, you probably know that. I'm not saying it's good or bad, i'm just saying things on a computer... it's weird to us. Everything is scalable on a computer, nothing really is in the real world, it feels like cheating. To me the debate is really about proprietary software and and the nature of computers.

Where I live education is mostly free anyway, and artists are heavily subsidized by the state. Greatest artists of the past had benevolent patrons, for a reason.

Actually I'm fairly familiar with Marx, not in a classic leftist way though. Not sure he could have predicted the whole information industry thing but I've always seen the whole GNU/Linx/free software paradigm as the only True Communism™ that exists, and maybe that's why paying for software is a difficult thing.

Re: Why is selling software so weird?

#73

Post by 21723 »

The value-add distribution for software is not quite right. It never goes negative.

Most software exists and can sell because it does things rich people who run corporations want done. That usually means it's good for them and bad for society, since our world is run by people who think in zero-sum terms.

So it's a two-tailed distribution.

Re: Why is selling software so weird?

#74

Post by marginalia_nu »

xmcqdpt2 wrote: post #56
bob1029 wrote: post #49

> Low volume software is not a good business to be in. I disagree very strongly with this based on my experience so far. Being in the business of low volume software is fantastic if your customers are other businesses . The advantages of low-volume/complex B2B software biz are incredible to me. Contract terms are measured in half-decades. Your users can actually be trained and held accountable in many cases. You don'…

Similarly, the article doesn't take into account the fact that many developers work on in-house software and developer tooling that are not directly sold to anyone. Custom in-house development follows much the same principle as B2B products: the very high marginal cost are considered worth it by the business because of the degree of specialization they need or the advantage they gain over the competition. Of course I…

Caveat here is that you need to be a sufficiently large shop for this to pan out. Need the economies of scale on your side.

I've seen several times smaller organizations attempting to adopt this model (because Google does it or whatever), with the result of the tools team being an enormous bottleneck for the organization.

Re: Why is selling software so weird?

#75

Post by zild3d »

21723 wrote: post #73

The value-add distribution for software is not quite right. It never goes negative. Most software exists and can sell because it does things rich people who run corporations want done. That usually means it's good for them and bad for society, since our world is run by people who think in zero-sum terms. So it's a two-tailed distribution.

You're using a different definition of value than the author. In which, the housing distribution would also not be right. You can build a house that is extremely dangerous, blocks the sun on the neighbor's otherwise warm sunny pool, replaces an attractive park that was valuable to the area, etc.

Could be good for the buyer, but bad for the neighborhood.

> since our world is run by people who think in zero-sum terms.

Not sure where this is coming from?

Re: Why is selling software so weird?

#76

Post by zild3d »

m12k wrote: post #16

I'm running into a weird paradox when it comes to marketing - providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder. It is a meritocracy of sorts, but one optimizing the value extracted FROM customers, not the value provided TO customers. By having thinner margins, you are also able to pay less to have others promote your product, and that's what the digi…

> providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder.

It can also make customers value your product less

Re: Why is selling software so weird?

#77

Post by simonh »

sokoloff wrote: post #69
simonh wrote: post #43

Earlier quoted context omitted.

>They generated about $1B for the company by creating a portal to (essentially) sell access to the company's existing data. You are completely discounting the cost of creating and maintaining the underlying data. You can't just write that off as zero. It also doesn't matter if the data generates other sources of revenue, that's great but you still don't get to write the cost off against one revenue stream and not ano…

For average cost analysis across a portfolio, yes. For marginal cost analysis, the question is “what’s the difference in cost between n and n+1 units?” Whether other streams succeed, fail, or don’t exist doesn’t change the cost to make the n+1 unit.

That's technically accurate, but the justification for the existence of this team and product (and their real cost base) cannot be predicated solely on the n+1 cost calculation. Suppose the other revenue streams do fail, now without this specific team and product the data set generation and maintenance would be completely uneconomic. In that situation the N+1 calculation will tell you to maintain the team and product no matter how expensive the underlying data set is.

OP was implying that this product was insanely profitable because you can ignore the cost of the underlying data set. I'm saying that makes no economic sense because marginal costs aren't the only costs.

To see how absurd it is, consider that the marginal cost of an n+1 visitor to Disneyworld is probably significantly negative, because they will buy things at concession stands and eat at the restaurant thus generating revenue even if the ticket is free. What are the implications of that for the ticket price you should charge for that visitor? Pretty much nothing because the fixed costs utterly dominate. Yet Disneyworld will run promotions and discounts and bundle deals with hotel stays and even flights. None of that will make any sense whatsoever if all you fixate on is the marginal cost of printing the ticket.

Re: Why is selling software so weird?

#79

Post by ZetaZero »

zeptonaut22 wrote: post #70
bob1029 wrote: post #49

> Low volume software is not a good business to be in. I disagree very strongly with this based on my experience so far. Being in the business of low volume software is fantastic if your customers are other businesses . The advantages of low-volume/complex B2B software biz are incredible to me. Contract terms are measured in half-decades. Your users can actually be trained and held accountable in many cases. You don'…

I actually had this as a planned footnote in the article, then cut it because I haven’t added support for footnotes yet lol

Footnotes(1) not supported?

(1) This is a footnote. You don't need any fancy software to write a footnote.

Re: Why is selling software so weird?

#80

Post by andi999 »

sirsinsalot wrote: post #37
gumby wrote: post #28

Earlier quoted context omitted.

> 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.

Having friends in pharma too, I never hear anything about the commercial end that I don't find disgusting. I get that like any business the goal is maximizing wealth, but feeling empathy for the "customer" makes the margins and decisions seem sickening. Honestly, the idealist in me says healthcare/pharma/research should be publicly owned and operated.

It costs one billion dollar(often much more) to go from zero to market for a new pharmaceutical product. Often there even is no product at the end. Of course there has to be big payday if it succeeds.
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