Dave Winer wrote a couple of impassioned pieces a few weeks ago: Who will pay for software? and Who will pay, part 2. In summary, he asserts that users aren’t willing to pay for software, and that the software industry is in a downward spiral as a result.
He certainly makes some valid points, but I’m not sure I agree that users aren’t willing to pay for software. And even if users aren’t willing to pay, how can we blame them? “Users” are accustomed to buying fully-functional products. When I buy a microwave or a car, I wouldn’t tolerate having to separately go out and buy more products just to make them work the way I want. Now that computers have become mainstream products, these “users” are expecting the same from their computing technology.
This is why platform vendors are in such dominant positions in the software industry. They’re the ones who can integrate, the ones who can assemble disparate technologies into cohesive wholes, and that is ultimately what users demand. Microsoft has filled this role better than anyone else, and that, more than any other reason, is why they’ve been so successful. So, it’s no surprise that one of the mandates coming from Steve Ballmer in this week’s yearly memo to Microsoft employees is that integration is key to Microsoft’s success:
“Some other vendors sell against integration,” he wrote. “We see and deliver unique customer value because of integration.”
Other budding platform vendors: Take heed.
All that being said, users are perfectly willing to pay for software if that software does something that nothing else can do for them. I recently shelled out north of $2,000 for a tablet PC primarily for its software. Without the software, what I bought is nothing more than an overpriced, underpowered laptop; but with the software that came with it, the overpriced, underpowered laptop allows me to work in a new and different way, which is ultimately highly, highly valuable to me as a busy individual, and that makes me more than willing to pay for it. By the way, I suspect a fair percentage of the profit from my purchase went to a software vendor.
Ultimately, this is really just commoditization at work. As Clayton Christensen writes in The Innovator’s Dillema, “When the performance of two or more competing products has improved beyond what the market demands, customers can no longer base their choice upon which is the higher performing product. The basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price” (page xxviii).
If you’re in the technology business, you can either try to stay ahead of the commoditization curve, or you can embrace the inevitable commoditizing effect and try to build your business model around it. In the end, the former is a difficult proposition. EMC made a fortune selling proprietary hardware in a commoditized hardware business, but now it’s under attack from below by Network Appliance, and NetApp will soon be under attack from below by vendors selling commodity NAS devices based on industry standard PC hardware, Linux, and Windows. Meanwhile, Dell has thrived, not by fighting commoditization, but by embracing it.
P.S. – Dave, there are plenty of people approaching software as artists, not workmen. Among them are the many hackers that make up the open source community, but that’ll have to be the subject of another missive.