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What are the range of company profit margins on the 10s of billions of dollars enterprise companies? I thought high costs would lead to razor-thin margins.

by da02 8y ago

beat 8y ago
Not necessarily. They often have huge moats. And they often have highly profitable businesses just because competing is dreadfully hard and complex, so they can afford for their software that makes the business work to be sucky and slow. The real danger for the big corporation business model is technological/social shifts wiping their business model out, not competition. I saw this when I worked at the Fed, years ago. I worked in a division that had two major financial products. One was 80% of their revenue and very powerful, a nearly billion dollar business. The other (what I worked on) was 20% of the division revenue. In the span of seven or eight years, those numbers flipped. The big line of business basically collapsed due to changes in the financial industry, and the smaller product basically ate all of its revenue and then some. This meant hundreds of layoffs and some very painful realignment at the executive level, including months wasted on a power grab.
- ethbro 8y ago
  > And they often have highly profitable businesses just because competing is dreadfully hard and complex, so they can afford for their software that makes the business work to be sucky and slow. Prototypical example: health care insurance claim management systems. You cannot begin to imagine how hard it is to rip one of those out and replace it. But the broader lesson, in keeping with the article's balance, is that enterprise tends to calcify and optimize existing processes. This is excellent, if say, you need to scale a process to 10x the volume without wrecking your margin. Or survive a government regulatory audit. This is terrible if your market upends and you need to make sweeping changes to stay relevant. (viz Kmart and Sear's slow immolation) Sucky, slow software is serving a purpose. It just usually isn't the most important purpose in a rapidly mutating world.

What are the range of company profit margins on the 10s of billions of dollars enterprise companies? I thought high costs would lead to razor-thin margins.

by da02 8y ago

What are the range of company profit margins on the 10s of billions of dollars enterprise companies? I thought high costs would lead to razor-thin margins.

beat 8y ago

Not necessarily. They often have huge moats. And they often have highly profitable businesses just because competing is dreadfully hard and complex, so they can afford for their software that makes the business work to be sucky and slow. The real danger for the big corporation business model is technological/social shifts wiping their business model out, not competition. I saw this when I worked at the Fed, years ago. I worked in a division that had two major financial products. One was 80% of their revenue and very powerful, a nearly billion dollar business. The other (what I worked on) was 20% of the division revenue. In the span of seven or eight years, those numbers flipped. The big line of business basically collapsed due to changes in the financial industry, and the smaller product basically ate all of its revenue and then some. This meant hundreds of layoffs and some very painful realignment at the executive level, including months wasted on a power grab.

ethbro 8y ago
> And they often have highly profitable businesses just because competing is dreadfully hard and complex, so they can afford for their software that makes the business work to be sucky and slow. Prototypical example: health care insurance claim management systems. You cannot begin to imagine how hard it is to rip one of those out and replace it. But the broader lesson, in keeping with the article's balance, is that enterprise tends to calcify and optimize existing processes. This is excellent, if say, you need to scale a process to 10x the volume without wrecking your margin. Or survive a government regulatory audit. This is terrible if your market upends and you need to make sweeping changes to stay relevant. (viz Kmart and Sear's slow immolation) Sucky, slow software is serving a purpose. It just usually isn't the most important purpose in a rapidly mutating world.