Software is a *not* a product

[iDonev]

Software is *not* a product

For a while now I've wanted to write a thread debunking the idea that apps are a product. I've finally some time so let's get started:

First, let's examine the history of products - all the way back to our ancestors who traded grain for stone, tools for meat and so on. In that scenario you have people putting effort and producing real physical things made of scarce resources. This means one could only produce a set number of products which drove demand (and in turn raised value).

Now let's jump to the digital age and examine why software companies do not sell products:

1) Software is made of materials that are not scarce - you can have as many SDKs installed on your system as you want. Also APIs have unlimited capacity.

2) Software reproduction takes little time and no effort - on a modern computer it will take you 1-2 seconds to replicate a 20MB application. Therefore software companies differ from carpenters of old who had to put many hours into making another set of furniture.

When you combine those two points - the abundance of digital resources and the effortless replication of software - you completely destroy the laws of supply and demand. When something is scarce, the price goes up; if it's in abundance, the price is low; if it's in unlimited quantity (as is the case) the price is zero. It's like the air we breathe - in terms of abundance - it's absolutely essential for our life, but no-one is charging you for it.

And here we come to the distinction - software is not a product. It's a service. While developers cannot charge for their application on the grounds that it's scarce (see points 1) and 2) ) they can charge for it on the grounds that they have put effort and time into making it. As you can see buying an app is much similar to getting a haircut, rather than buying a cup of coffee.

I think I've rambled long enough. I hope you find something of value in the post.
Comments are more than welcome.

 

[Timhewitt]

Total nonsense

 

[kch50428]

Total nonsense

Yes, your comment is just that.

To the original post... software can be a product, or a service depending upon agreements made between providers and consumers.

I'm one that would prefer software on a service model... with a smaller upfront cost, and ongoing maintenance services.

 

[1982ollie]

I hear where iDonev is coming from though....

 

[Massie]

I'm not quite sure what point the original post is trying to make--is it that software developers should charge less than hardware developers? That they should charge nothing? You seem to say both things in your post, and I don't really understand the distinction you're trying to make. The "haircut vs. coffee" comparison doesn't mean anything to me, as I'm still paying for both with actual money.

I am curious to hear what people think about the recent release of Adobe's flagship Creative Suite software as a monthly subscription service, a new idea for them that seems like it might make a good example for your post.

 

[iDonev]

... software can be a product ... depending upon agreements made between providers and consumers.

Can you give an example of such an agreement, even if it's just a thought exercise?

I'm one that would prefer software on a service model... with a smaller upfront cost, and ongoing maintenance services.

I agree with that. Since developers are selling their time and efforts, the most logical payment scheme would be to charge every time you add/enhance a feature.

Total nonsense

I'd like some evidence, please.

I'm not quite sure what point the original post is trying to make....

I wanted to make two points: One - to show the difference between a service and a product and why software shares more characteristics with a service. And two - to let people see that Apple (in our case) has adopted the wrong model - a retail model when the things developers are selling are services.

Iam curious to hear what people think about the recent release of Adobe's flagship Creative Suite software as a monthly subscription service, a new idea for them that seems like it might make a good example for your post.

When it comes to Adobe, I have no problem renting a service - as long as you get all new features for free. If you decide to buy, however, new features should come with a price tag since some amount of effort was put into creating them.

 

[Just_Me_D]

...(snipped)... software can be a product, or a service depending upon agreements made between providers and consumers.

I'm one that would prefer software on a service model... with a smaller upfront cost, and ongoing maintenance services.

+1....I agree with Keith.



Just Me, D
(Tapatalk - iPhone 4S)

 

[Massie]

I think too that some of this distinction is actually consumer-driven: if app developers tried to charge for every upgrade, people would be up in arms (right or wrong).

Might also be worth asking if we are talking about apps specifically or a wider range of things?for example, a video game you download to your Wii. How does that fit into the game?

 

[kch50428]

Can you give an example of such an agreement, even if it's just a thought exercise?

I have no specific example... it boils down to this: if you get a compilation of ones and zeros to do a specific task and have no further relationship with the compiler of the digits, that's a product. There's tons of software out there like that... games you buy... then buy the next year's "model".

It becomes a service when you pay ongoing fees for ongoing maintenance of the ones an zeros.

 

[iDonev]

Might also be worth asking if we are talking about apps specifically or a wider range of things?for example, a video game you download to your Wii. How does that fit into the game?

An argument can be made that all digital content (from OS to apps to games to multimedia) is governed by the two points I made in my original post which disqualifies them as paid products since they are in unlimited supply (a bunch of ones and zeroes in a particular order) and therefore driving the supply to infinity and subsequently the demand to zero.

...There's tons of software out there like that... games you buy... then buy the next year's "model".

What drives the price of that software? Assuming we're using online distribution, the supply will be limitless and so you can't charge on the basis of scarcity. At that point you can either release the software free of charge, or charge a nominal fee for the work that you've put in.

It becomes a service when you pay ongoing fees for ongoing maintenance of the ones an zeros.

Exactly! That's where the App Store model fails developers. The most devoted developers maintain their apps a long time - even years, and yet we treat their software as a product - you buy once, use and update forever.

 

[Massie]

I guess my question is this: if you see demand as being zero but still say developers can charge for what they do, then what is the difference whether you call an app a product or a service? You're still paying.

 

[iDonev]

I guess my question is this: if you see demand as being zero but still say developers can charge for what they do, then what is the difference whether you call an app a product or a service? You're still paying.

True, but the two cases employ different payment schemes. With a product model you buy an app once and that's it - you're entitled to use and upgrade it indefinitely. But that's unfair to developers since the price of the app is based on the efforts they have put up to this point and yet all future updates are free.

If more people thought of software as a service, they would be more willing to pay subscriptions or have paid updates.

 

[Massie]

I see what you mean, but I think it can work either way. And not every software update is free?unless we're talking about ios only. But that is a restriction put in place by Apple, which some devs get around by releasing an update as a v.2 app (see Photogene or Photoforge). People seem willing to pay for those?I know I did.

Subscriptions are a different ball of wax, and I don't think they make sense for the vast majority of apps.

 

[sherlock]

Interesting discussion. I would consider software as more an intellectual property than either a product or service. One thing is for sure some software is over while others are under priced. Updates, have traditionally been free, as far as apps are concerned, and personally I like it that way.