July 13, 2008 at 7:25 pm
Comments posted to this topic are about the item Software for Profit
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July 14, 2008 at 7:23 am
Steve,
I love the newsletters, but I'd like to make a small suggestion. Can you keep them to a reasonable width? Every so often I get one that is wider than my screen even at 1280X1024 and I'm forced to horizontally scrolly on most of the lines of your editorial.
July 14, 2008 at 7:29 am
Steve, wonderful post. This is sure to draw a lot of comments. Here is the first:
You said:
I think it's fascinating that we have this huge business around the world that essentially makes money from something that doesn't cost any more to produce an extra copy.
I almost snapped my neck doing a double take. Oh sure I can make thousands of copies of my install CDs for pennies per copy. I can post the whole install to a web site and then it only cost me bandwidth charges for the download. But then think of the per user costs that I incur supporting each of them.
ATBCharles Kincaid
July 14, 2008 at 8:01 am
I'll second the newsletter width formatting comment. Most of the time they format nicely in my email client, but every now and then they seem to be forced to a very wide layout.
July 14, 2008 at 8:52 am
Can anyone having issues with the newsletter send their client, OS, and screenshot to the webmaster at sqlservercentral.com? The newsletters appear fine on test systems, easily fitting inside 800x600.
Charles, a good point, I was thinking more about the production costs. I guess you could add in other costs, bandwidth, server support, etc., and then come up with a variable cost per item. From my basic accounting studies, those would really be more "fixed" costs that you discretely spent. A server that can download 0-10,000 copies a month is like hiring another programmer or opening an office, you need more of them to produce the product, but they're fixed costs, not based on the number of copies.
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July 14, 2008 at 8:58 am
I sent you screenshots of both the e-mail and my screen resolution settings.
July 14, 2008 at 9:19 am
Charles Kincaid (7/14/2008)
Steve, wonderful post. This is sure to draw a lot of comments. Here is the first:You said:
I think it's fascinating that we have this huge business around the world that essentially makes money from something that doesn't cost any more to produce an extra copy.
I almost snapped my neck doing a double take. Oh sure I can make thousands of copies of my install CDs for pennies per copy. I can post the whole install to a web site and then it only cost me bandwidth charges for the download. But then think of the per user costs that I incur supporting each of them.
I concur with Charles; Steve goes on to repeat the myth of software repro cost being in "stark contrast to most of the goods sold around the world."
In fact, if you look at the stats of most 'advanced' goods (beyond staples and commodities), the repro cost is the smallest cost item for the goods of a developed, advanced economy -- this is sort of a natural consequence of an economy moving upstream to more knowledge- and service- based goods, away from goods with large commodity inputs (such as agricultural products, etc). To give just a few examples: semiconductor chips, autos, and drugs. The cost of reproducing the end product (a chip, an auto, or a drug compound) is vastly less than engineering the design and implementing the production process.
Further, software repro cost is not actually zero, and there is a very big difference when things are close to zero but not actually zero. (Consider that for a modern supermarket or shopping mall, the cost of the shelf space occupied by any item is approximately zero, but all those "zeros" add up to millions of dollars -- which when analyzed properly compares favorably comparable to Amazon, etc; so much for the "long tail"....)
Software repro cost is a total red herring in the analysis of a software business, a fact readily and conveniently overlooked by all the open source promoters...! I consider it almost tragic that a large number of otherwise very smart people have become convinced that their intellectual contribution to the world is worth less than commodities dug out of the ground. It is sad to think of a world that values the fruits of intellectual thought as a commodity item.
-frank
July 14, 2008 at 9:26 am
re: "The newsletters appear fine on test systems, easily fitting inside 800x600."
FYI: I have 800x600 and Windows XP. For me also, the e-mail is too wide and I have to scroll left and right (a lot) to read a line. But I'm used to it.
July 14, 2008 at 9:28 am
One thing that does support Steve in the create once at a cost and the rest of the copies are only a few cents per share is the library of source code that is being built on the internet.
Various pros and heros are willing to write something for one of their solutions and for coin, and then they post it out there for us to use at will and at our own risk. We fold spindle and mutilate that code to make it into what we want. But they provide a great product to us at pennies and many appreciate it.
The point that Charles makes is wonderful. It is a surprise how costly a 'free system' can cost.
Miles...
Not all gray hairs are Dinosaurs!
July 14, 2008 at 9:41 am
I'm not having issues seeing the news letter. We use Outlook with Exchange. As blind as I am I'm running 1280 x 1024 on a 19 inch LCD.
On the main point: Distribution cost of utilities where the installation is trivial can be kept low. Sure, if I could walk around and hand out those business card CDs then extra copies are no big cost to me. That's what we have been calling "shrink wrap" software.
I'm betting that there are a significant number of the folk 'round here that will never be on the inside of shrink wrap. Our stuff is way to heavy to distribute that way. It's more like the old Edwards stuff that takes an on-site consultant to install.
Most of our stuff (at DCT) winds up on a Mobile device. Usually we sold the device and the Mobile Data plan that goes with it. Our cost for supporting that device, even if the user never calls the help desk are surprising.
ATBCharles Kincaid
July 14, 2008 at 9:54 am
Please post newsletter issues in the Suggestions forum rather than here. It's mostly a client issue (mail client), not OS.
Nothing is free. That's a given, and I don't want to imply anything else. Software is a very low cost for incremental copies, not free, but it's low, lower than most items.
I don't mean to imply it's got less value. On the contrary, there are pieces of software that can do what nothing in the physical world can do. However there are lots of cases where we move "bits" around, and it's at a much lower cost than moving goods.
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July 14, 2008 at 3:49 pm
This is like inkjet printers and ink. The printers can cost millions of dollars in development but the manufacturers can't sell them for much so they recoup the costs through the sales of ink. Software would cost millions of dollars in development (hardware, buildings, salaries etc) so the costs are recouped through sales of the software. The sales would also provide the funds to keep producing and supporting the software. Of course there is always some profit to be had to keep the investors happy!
Nicole Bowman
Nothing is forever.
July 14, 2008 at 10:48 pm
Software as a business. Not a bad one to be in, frankly:
Exxon-Mobil profit margin: 10.85%
BP profit margin: 8.40%
Royal Dutch Shell profit margin: 8.35%
---------
Microsoft profit margin: 28.33%
Google profit margin: 24.89%
Oracle profit margin: 24.61%
One has to wonder who is gouging their customers more?
James Stover, McDBA
July 15, 2008 at 11:52 am
Interesting numbers.
So are costs higher in physical businesses or are software companies taking advantage of their lower costs and charging more? Is there value in what they're providing?
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July 15, 2008 at 5:42 pm
I would say software companies charge more AND are more profitable because they are able to make switching costs very high. Think Oracle --> SQL or PeopleSoft --> SAP. Big migrations can easily run into the millions. Then there is the production/distribution of the product. The first copy of SQL Server costs Microsoft $1,000,000,000 and the second copy costs 50 cents (ok, not really. but you get the idea). Lock people in and burn a CD. Wish I'd thought of it first!!
Kudos to the major software vendors for striking upon a highly profitable business model. My main complaint is that it's a lazy industry churning out lazy products and charging a premium for them. Lazy in the respect that they release products they KNOW are flawed (almost unusable) and rely on forced updates (i.e. upgrade to SP2 if you want support) to eventually make the product stable/usable. Pop in a forced update and get people to download it. So very incredibly lazy. You wouldn't see Boeing or Toyota (or nearly any company) getting away with that. In this respect, all the big software players are gouging their customers. How about we pay you when WE are satisfied with the product? Hmmm??
James Stover, McDBA
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