Sustainable software, part I: The software value conundrum

After my last post on software sustainability, I had a number of conversation that are prompting me to clarify what I mean when I talk of sustainable software. I’m starting to jot it down, but it makes for quite a long read, so I thought it would be better to split it in a number of posts. Let me start with my very own take of the problem in front of us, that is the software value conundrum, or how software (let alone Open Source Software) hardly possesses any face value per se.

The “get filthy rich” recipe of the software industry has always been about near-zero production costs: once you have a product, all you need is a marketing & sales budget, as the marginal cost of production approaches zero. This perfect economy of scale makes for a great business model on paper, but is very hard to achieve and even harder to defend in practice: to start with, you need to be innovative enough to create a nearly monopolistic scenario to pull it off, something that is not impossible to attain if you are sufficiently creative and brave to generate a need or a niche (operating systems, relational databases, search engines…) that will allow you to create artificial scarcity and ask for a price. Yet if creating innovation isn’t that hard after all, the problem comes in defending the initial monopoly from the market fostering alternatives, competitors, or both: so far, the only deterrent are barriers to entry which, in software, proved to be the weakest link.

We buy houses, cars, computers and groceries. We don’t build them because we recognize the effort required in producing or delivering goods, and we realize it would be a lot harder for us to do it ourselves. The barrier to entry is steep and sturdy, as we are unlikely to learn about welding and build a car in our backyard or devote time and land to grow our own wheat, crush it to flour and bake it. We see value in those who venture into complex endeavors: we are ready to reward them and only a handful of us are prepared to climb the vertiginous barrier to build alternatives. Most of all: we easily understand how the unit of goods we are buying has been costing money to be produced and delivered to our doorstep. Sanity check: we see enough value in the effort required to produce goods that we consider morally and ethically wrong to steal it.

That’s not the case for software anymore. Open Source has shown us how the barrier to entry for software is just a narrow trench, not quite a Maginot line. Obfuscation isn’t enough, and makes us uncomfortable in that the hood welded shut takes away too much. The alternative of building software ourselves is compelling enough nowadays: with hardware prices plunging and connectivity everywhere, all a software house needs is a smart guy and a workstation (not to mention as we all know on the Internet nobody knows you’re a dog). Do not even bother with distribution: we know very well that there are nearly no costs involved in producing a marginal unit of goods. These factors, combined, make the dream business model go down the drain. The barrier to entry is just too easy to overcome, so much that sometimes you don’t need the strong motivation of a competitor attacking the incumbent: scratching your own itch is enough, especially when you consider how Open Source will help you find others with the same problem and happy to share their findings and work with you.

Sanity check, again: let me oversimplify what Helen Nissenbaum wrote in ”Should I copy my neighbor’s software?” (but don’t let it be an excuse for not reading it): do we have strong moral objections towards those who copy digital assets, be it music or software? Apparently that’s not the case, yet the law is exactly the same. This is, if you want, the anthropologist dismissal of artificial scarcity: in the end, it just doesn’t work.

Where does this all leave us? My very own conclusion is that basing a software business on licensing revenues has a very slim chance to succeed, let alone when Open Source is part of the picture. The good news is that there are ways to make money with software (and yes, even getting filthy rich is an option). But that will have to wait for another post.



2 thoughts on “Sustainable software, part I: The software value conundrum”

Leave a Reply

Your email address will not be published. Required fields are marked *