15 ms·

Why is selling software so weird?

219 points by zeptonaut22 5y ago

jsiaajdsdaa 5y ago
It's because the hardest parts of software involve connecting with other systems and soliciting your custom requirements. Imagine if you wanted to buy a custom car, but you wanted an "off the shelf from walmart" experience. "Hello, I'd like to buy a custom car." "Ok great, we have many over there." "Yes but you don't have any pink ones with cool designs" "Well, we could make you a pink one, but what design would you like to see on it?" "I don't know, maybe a Nascar design. Oh, no, what about a Harry Potter design?" "We can do that for you, but it will take a few weeks and you'd have to put a deposit" And now you aren't selling things off the shelf.
- deleted 5y ago
  [deleted]
- jahewson 5y ago
  Perfectly describes the experience of a startup staring to sell to enterprise!
  - JoshTriplett 5y ago
    Except that the "Oh, no, what about" comes later, and repeatedly.
    - squeaky-clean 5y ago
      "Here's your Harry Potter car!" "Who are all these teenagers in robes on my car? I don't see Gandalf or Legolas or Gimli anywhere!"
  - Jaruzel 5y ago
    I had exactly this experience many many years ago when I was just starting out. I'd written a small tool that enabled pop-up messages between [Windows] users on a network. It was protocol agnostic - as long as the users had a shared file area, it would work. This was back in the day when even internal email was new and mostly non-existent in the workplace. I sold it as shareware originally, but then a Big Fish came along and said 'we want a licence for 1,000+ users, but can you come in and meet us to discuss'. Seeing this as a pivotal moment in my entrepreneurial career, I agreed to meet them. Five minutes into the meeting they started rattling off a long list of features they would like added (for no extra fee). Somewhat shocked, I numbly agreed in principle that I'd look at implementing them for the next release. Once I had time to think about it, I realised that as a one-man-startup there was no way I could implement their requests, and had to back out of the deal. And that's the problem. The people with money assume they can ask for whatever they like and have no concept that sometimes it's simply unprofitable for the little-guy to deliver it.
    - hutzlibu 5y ago
      "The people with money assume they can ask for whatever they like and have no concept that sometimes it's simply unprofitable for the little-guy to deliver it." Thats a question of negotiating, isn't it? They can ask for whatever they like and you can reply with whatever you like. And then you find a agreement, or not. The problem in your case seems to have been more lack of confidence and experience on your part, because like you said, selling a licence for a existing product is something very different, from making a contract about new features. Otherwise a little guy can grow and hire more people to help him with a big contract, if this is what he or she wants.
      - Jaruzel 5y ago
        > The problem in your case seems to have been more lack of confidence and experience on your part yeah, I was like 23 at the time, and totally inexperienced. Had it happened now, 20+ years later, the conversation would have been totally different.
  - tarsinge 5y ago
    "We are looking for an economic daily driver. Please find our written requirements": unrealistic mix of a F1 car and a semi-truck.
    - jsiaajdsdaa 5y ago
      If we just JIRA hard enough, we can break the laws of physics and propel a semi-truck at 187 MPH using only an electric battery and bike chain.
- murukesh_s 5y ago
  >"Hello, I'd like to buy a custom car." How did you even get that Qs coming? For a bootstrapped startup selling to enterprises figuring that out itself is half the battle
  - jsiaajdsdaa 5y ago
    You are very right :) If you don't have an existing relationship with people who have budgets, my only guess is to have a blog that attracts inbound leads. I'd imagine x% of leads don't have a budget or buying desire though.
Maursault 5y ago
> Why is selling software so weird? Because it is not, but it should be, sold by the pound.
- laurasia99 5y ago
  Pound of flesh extracted by management from the developers? Sounds good for the games industry ;-)
- deleted 5y ago
  [deleted]
- bdavis__ 5y ago
  by the sloc.
  - throwaway889900 5y ago
    It is in government contracts!
riazrizvi 5y ago
Nice title. I don’t feel that the article delivers to the question raised.
sethrin 5y ago
Because intellectual property isn't.
bruce511 5y ago
So yeah, software is different to houses. Software needs huge [1] upfront spend in time and/or money. This means risk, and high risk comes with potential high reward. By contrast building houses, even at scale, is pretty low risk, but since its low risk the upside is constrained. In many ways software is a lot more like making movies. You have to do the whole thing before you see any revenue. Risk is high, most lose money, but a few make the big bucks. This model does favour those who can take on more risk - ie companies with deep pockets. Even there risk is mitigated - formulas are followed, safe casting choices, sequels etc. Smaller indie movies can still be wildly profitable, just on a smaller budget. Don't make Lord of the Rings, make The Blair Witch Project. For me, we started out mitigating risk by writing customized software others paid for. When we had no work we worked on our own stuff. Over time our own stuff paid enough so we stopped doing custom stuff. With every new project though we evaluate risk, try and keep it down, and so on. Mostly we mitigate risk by doing what we know, to our established market, (aka sequels). 5 years ago we had the opportunity and ability to enter a new market space and we discovered something new. 30 years ago we were selling the idea of computerising. We were competing literally with paper and pen. We often had to supply the actual computer - for some Companies it was their first, and only PC. While challenging, the upside to the customer was obvious and very valuable. Wheras This new product was going into a space with 3 established compeditors. While objectively better, the existing ones were good enough, and as the cost of change is high it has been a long road to get some traction, which we are slowly doing. That we could afford to persist was because the other side of the business was working well enough to pay us. So think day job, and side project (with the side project having 3 full time employees :)). The lesson - Today software isn't fighting pen and paper, it's fighting other software that is 10,20,or 30 years matured. The path we trod is not going to be the right path now. There are gaps, but doing the non-software things like marketing, customer analysis etc upfront is now much more important than it used to be. There are opportunities, but it takes a moment to imagine them, and a Lot of work to validate them, and most imaginations are incorrect. Doing the upfront work well will pay off multiple times later. Oh and don't give up the day job too early...google may think self-driving-cars are the way of the road future, but they haven't quit search. [1] huge is a relative term - what is huge for an individual might be trivial for a company.
- 5y ago
paxys 5y ago
While all of this is mostly true, this problem isn't unique to software by a mile. The model of high fixed cost, low marginal cost applies to pretty much every consumer good or service sold in the industrial age. If you think publishing the first copy of a piece of software is hard, try setting up a new production line in a factory, or opening a restaurant, or producing a music album or movie. Yes it is hard to break into a space that is dominated by large established companies. Yes you need a lot of up front capital. Yes you will need to differentiate yourself. None of this makes software a "weird anomaly", this is how business works.
- vineyardmike 5y ago
  Software still has the lowest marginal cost - the distribution cost is basically 0, unlike things like CDs. And unlike a movie or album, the value that can be extracted via software is much higher. There's tons of make-once sell-lots products, but you need factories and supply chains and all that crap, not just a cat6 connection. If you want to serve more customers, you need to buy more CDs. Streaming is better for content distribution, except the content still has limited value created (so limited price) since its often consume-once and has a limited life span - and digital content is basically "tech" even if its not quite SaaS. Tech is what it is because of how easy it is to create, and how much value it generates, and how low the marginal costs are. Nothing physical compares. I interviewed for a team at <Big Co> that was part of a 100 person org. They generated about $1B for the company by creating a portal to (essentially) sell access to the company's existing data. They said most of what they spent that 100 people on was building integrations into existing b2b enterprise apps so other companies could ingest it easier. The per-person value created (extracted?) at this org is astonishing, especially since most of those 100 people didn't actually add value to the root product, beyond making it easier to use.
  - elliotec 5y ago
    > the distribution cost is basically 0 How do you figure? Surely you know the magnitude of ad spend on software products, not to mention hosting and scaling infrastructure. We're not shipping cd's to every mailbox anymore but a typical marketing budget + Heroku/AWS cost is likely far higher for a typical growth SAAS startup than AOL was dumping on their physical distribution methods in the early 2000s right?
galaxyLogic 5y ago
The weird part about software is that most of individual code-units (i.e. functions, methods) are not very specific to your product. Thus they could be part of another product as well And then you realize it's actually a huge waste that they are not used by other products as well. You are almost re-inventing the wheel most of the time you write a new function. The value is only in what your multitude of trivial parts do together. Maybe that's not weird, but it's peculiar, to software development.
- dotancohen 5y ago
  That is not peculiar to software development, even the most sophisticated F1 motor or Raptor engine is composed of five or six "simple machines" based on only three principals: wheel (wheel, pulley), lever (lever, screw), inclined plane (inclined plane, wedge).
  - krisoft 5y ago
    How would you break down a coaxial swirl injector (an important part of the Raptor engine) into “simple machines”? Are the regenerative coolant pipes built into the Raptor’s nozzle a wheel, a lever, or an inclined plane?
    - dotancohen 5y ago
      > How would you break down a coaxial swirl injector (an important part of the Raptor engine) into “simple machines”? I didn't complete the Mechanical Engineering degree two decades ago, so you might want to consult an engineer. Preferably one at SpaceX )) Being familiar with only typical automotive electromechanical fuel injectors, which presumably operate on similar principals, I'd also like to see where the spring and solenoid are classified. The valve itself is obviously an inclined plane. > Are the regenerative coolant pipes built into the Raptor’s nozzle a wheel, a lever, or an inclined plane? I'm not familiar with the Raptor, but from examining an RS-25 up close a few years back I would say that the intricate regenerative coolant pipes that make up the nozzle are not mechanical devices )). They are a component of a mechanical device, though, in the sense that they are bolted to the same device as the e.g. obviously mechanical turbopump is bolted to. Surely there's a certified engineer in the HN audience who could chime in.
m12k 5y ago
I'm running into a weird paradox when it comes to marketing - providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder. It is a meritocracy of sorts, but one optimizing the value extracted FROM customers, not the value provided TO customers. By having thinner margins, you are also able to pay less to have others promote your product, and that's what the digital ad market is optimizing for.
- ensemblehq 5y ago
  You’re right that cheaper services could affect customer outreach budgets and it does limit your options on what you can do (I.e. incentivized channels) but it also forces you to focus on other channels that suit your budget (I.e. content marketing, building relationships in forums, etc.) Also, price may not necessarily have to be fixed for all customer segments, you can use pricing as a strategy lever.
- zild3d 5y ago
  > providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder. It can also make customers value your product less
interpenetrate 5y ago
The question contains a false premise. > Paging back through history, there have been very few opportunities for near-zero marginal cost goods. The only way that capitalism allows for the production of non-rival use values is by turning them into "club goods" and excluding access to them by state-enforced monopoly (intellectual property laws in this case). There's no shortage of examples of club goods. The three "downsides" the author lists as unique to club goods aren't unique to club goods at all. (1) All commodity production requires capital ("up front time"); (2) All new commodity categories are risky and only tested when they hit the market; (3) Breaking into any commodity category is next to impossible without sufficient capital.
usr1106 5y ago
Software is very close to math. Most people would agree that math should not be sold or licensed. How to add numbers is not something that should be paid for. If actually someone made their living by adding numbers we would probably agree they should be paid. So the programmer should be paid, the hardware should be paid, but the software not? Doesn't seem to work. Exactly like people expect everything to be free on the internet. Surveillance capitalism is one way to overcome the paradox. Not that I personally like it, but it seems to work.
- WJW 5y ago
  Since everybody learns basic math in school these days it has ceased to be something you can really charge for, similar to how it would be very difficult to charge for a software package that only copies files on a single computer or something like that. Applied math absolutely gets paid for, but it is a far cry from "adding numbers". Think new optimization techniques for a factory logistics package and things like that.
- goodpoint 5y ago
  > Doesn't seem to work It worked very well when it came to do all the foundational work for developing semiconductors, early computers, fiber optic, GPS, GSM, particle physics, CD/DVDs, CCDs, spread spectrum radio, solar panels... Research benefiting society needs was paid by society. It was paid by taxes.
bni 5y ago
A lot of software (most?) don't have zero marginal cost. Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. The real business is doing this by charging per hour to do those customisations. The base software is more or less a made up marketing story to be able to get a foothold. The most successful and established companies can charge a large up front fee (license).
- jiri 5y ago
  I agree but I am thinking this might be result of "being able to charge customer" approach. This model may be easiest way to charge every customer instead of haggle with customers with pay for base software which price is (f.e. wordpress) or often quickly falls to zero. More optimal way to create such software would be without customisations, but you cant do that cause you cant charge enough.
- ihateolives 5y ago
  > Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. Meanwhile Adobe just rakes in 10-50$ per month on Creative Suite plan subscriptions from individuals and small businesses all over the world who are happy just to get access to the software.
zokier 5y ago
I think one major aspect is that software itself is rarely sold. Instead access to software (via license or saas) is what is being sold.
hyperman1 5y ago
Eric S raymond had a different way to explain this: Software is largely a service industry operating under the persistent but unfounded delusion that it is a manufacturing industry
- simonh 5y ago
  Simply having customers incurs costs in support. The more customers you have the more different hardware and OS patch and ancillary software configurations your app is running on, the more uses your app it put to, the more problematic edge cases in the UI and functionality and bugs will be encountered, the more feature requests you will get, the higher the chance that old versions of your app will be in use for longer. Eric's exactly right, you're providing a service and service costs scale up with users. Not all of them linearly, but some for sure.
- 0xbadcafebee 5y ago
  It used to be manufacturing, back when you'd ship a cardboard box to a store once a year. I think the delusion we have today is that the internet-enabled model is somehow superior. It just seems to introduce more problems, and forces companies to expend a much greater amount of money, effort, and maintenance to get the same result consistently. I feel like the next great revolution will be selling updated software only once a year. No privacy implications, no persistent security concerns, no data hoarding, no advertising, no connectivity issues, no addictive social gamification or micro-payment or subscription service. Just a fully-functioning rock-solid program on your local device, developed by a small team, sold to millions of people. I'd pay premium for that!
  - coldcode 5y ago
    My first product in 1987 sold in boxes, with floppies that had to be duplicated and a manual printed, plus shipping to distributors and mail order companies. If we were lucky we got paid 180 days later assuming they were sold, otherwise we had to pay to get the unsold inventory back. A later product with a larger audience cost $10 just to send an update, and that had very little profit, since it required all the same manufacturing costs. I never did that again.
Krisjohn 5y ago
Blogspam. Also, you're going to lose me a little if I'm just supposed to accept that your pricing model for your software is $x per month.
kitd 5y ago
Good article. This bit is interesting: The third downside is that, unless you can differentiate your product from what already exists, it’s going to be hard to find a foothold in the market. Given how many software products already exist, that’s a high hurdle to clear. It seems to me that, in any particular domain where there are several or many competing solutions, each with small differentiations, each differentiation takes on a disproportionate amount of significance. So it is possible to make a business out of fairly small differentiations from normal. Eg, through integrating with external systems or better UX for common tasks. And even better, it is often the competitors that have done the work for you deciding which external systems need integrating and what the common tasks are. Where the diffs are the USPs for all your competitors, it almost makes it easier for you to join in.
- tluyben2 5y ago
  Also, most people should let go of the silicon Valley or US mindset that success means 'a significant portion of your target market'. We do not all have to or want to be billion$ company founders or grow fast or have many employees; it is fine running a small SaaS that gives you 500k-1m revenue/year and you run on your own. Maybe not in the US (I know too little about the Healthcare and litigation parts), but in the EU, you can live and retire as a king with those numbers (provided you don't do things that are too stupid along the way). With such a company, you do not need much to differentiate to get 1000+ paying clients: you just probably will never get to millions of clients, and that is OK.
syl_sau 5y ago
I'd predicate the answer to this question on a much more materialistic basis than the author : it's weird to sell software because it's doesn't really exist. I mean, it's barely tangible. You can copy it indefinitely. It doesn't exist physically. It's much more natural really to buy, say, a painting or a house. You can hang it, see it, use it. You have exactly one house, exactly one of this painting. Software, compared to that, just feel lazy. One could argue that most software in history did not really improve anything, and that true innovation came from advancements in hardware, which software just took time to adapt to.
- simonh 5y ago
  How is that different from music, TV, movies. Is entertainment a real thing? What about education, is that a tangible commodity? That's the kind of thinking that lead Marx to his theory of value, and his belief in the parasitic nature of all economic activities except for making physical things.
  - syl_sau 5y ago
    Concerts and plays are a real things that happen in the real world. So is teaching. They don't exist in a virtual space where everything is duplicable ad infinitum and where the next machine is just as capable as the first. Do you pay for music and movies on the internet? I don't, and most people do not directly. They go through platforms because otherwise people just avoid paying for them. Copyright and the Internet are kind of conflictual by nature, you probably know that. I'm not saying it's good or bad, i'm just saying things on a computer... it's weird to us. Everything is scalable on a computer, nothing really is in the real world, it feels like cheating. To me the debate is really about proprietary software and and the nature of computers. Where I live education is mostly free anyway, and artists are heavily subsidized by the state. Greatest artists of the past had benevolent patrons, for a reason. Actually I'm fairly familiar with Marx, not in a classic leftist way though. Not sure he could have predicted the whole information industry thing but I've always seen the whole GNU/Linx/free software paradigm as the only True Communism™ that exists, and maybe that's why paying for software is a difficult thing.
wodenokoto 5y ago
Was happy to see this wasn’t some rant about people not wanting to spend the price of a cup of coffee on your app. Instead it’s an exploration of the marginal cost of software and how that impacts the creators business. > The digital nature of software makes it extremely easy to ignore pesky distractions like customers right up until the moment you need their money to buy that expensive Icelandic yogurt you love. This quote comes right after a paragraph about how the closest thing to the near zero marginal cost of software is the publishing business. I think that book authors are in a similar position. Spend a year or two writing a novel with almost no idea If people wants to read it.
mihaic 5y ago
This analysis feels shallow, since it doesn't address the current landscape: it takes a lot longer than 10-15 years ago to get from nothing to revenue if you don't have a contract in advance, while most of the mainstream advice for software entrepreneurs is from a time when the barrier of entry was lower. The dificulty is mentioned, but probably requires strong emphasis and going into details (having a distribution mechanism before writing any code for instance). I often feel like even VCs and insiders are stuck a bit in the past, since their success came from a different ecosystem.
- supert56 5y ago
  I totally agree with this. Distribution is the most underrated, most difficult part of creating a tech company. In the UK Squarespace peddles the slogan 'a website makes it real'. This is very misleading. Making the website is the easy part, being found if you have no prior audience, no experience with SEO or a lot of money for ads is incredibly hard. In my opinion breaking into the tech world now is much harder than it was 5 years ago regardless of how good your product is.
tuxguy 5y ago
Fantastic read ! I have never had leverage explained so simply and succintly . The author really has a gift for great articulation.
bob1029 5y ago
> Low volume software is not a good business to be in. I disagree very strongly with this based on my experience so far. Being in the business of low volume software is fantastic if your customers are other businesses. The advantages of low-volume/complex B2B software biz are incredible to me. Contract terms are measured in half-decades. Your users can actually be trained and held accountable in many cases. You don't have to plan for nightmare public cloud scenarios. Your software will usually be running in some firewalled bunker with a guarantee of <10k concurrent users. When operating under these constraints, there are lots of fun ways to manipulate the engineering to your advantage (i.e. SQLite vs nightmare distributed abominations). Granted, low volume B2B software is just as worthless as any other kind if it doesn't deliver profitable value proposition to the customer. We currently sell software licenses measured in the 6/7 figure cost range (and get away with it because of the complexity of the business and value proposition). This means our little startup can hand-craft each customer relationship and carefully manage the sales funnel for optimal outcomes all around.
- grvdrm 5y ago
  I’d love to know what you build!
- xmcqdpt2 5y ago
  Similarly, the article doesn't take into account the fact that many developers work on in-house software and developer tooling that are not directly sold to anyone. Custom in-house development follows much the same principle as B2B products: the very high marginal cost are considered worth it by the business because of the degree of specialization they need or the advantage they gain over the competition. Of course I won't become billionaire off it but it's not for the lack of "value" I'm creating.
  - marginalia_nu 5y ago
    Caveat here is that you need to be a sufficiently large shop for this to pan out. Need the economies of scale on your side. I've seen several times smaller organizations attempting to adopt this model (because Google does it or whatever), with the result of the tools team being an enormous bottleneck for the organization.
ngcc_hk 5y ago
How many users of swift ?
ianai 5y ago
Their point is interesting. Feels a little like the first mover take all outcome, too. Ie if software does do something dramatically helpful (has a truly killer feature) it’ll often push other entrants out. Thinking of you, Windows 95. I think this also underscores that programmers would benefit from some form of regularization. Like instead of a degree followed by a job, a close apprenticeship graduating into a junior membership in a programmer guild or union. Is anybody offering that?
_ZeD_ 5y ago
>>> If you squint enough, building software looks a lot like building a house. Ahahah No, It doesn't
21723 5y ago
The value-add distribution for software is not quite right. It never goes negative. Most software exists and can sell because it does things rich people who run corporations want done. That usually means it's good for them and bad for society, since our world is run by people who think in zero-sum terms. So it's a two-tailed distribution.
- zild3d 5y ago
  You're using a different definition of value than the author. In which, the housing distribution would also not be right. You can build a house that is extremely dangerous, blocks the sun on the neighbor's otherwise warm sunny pool, replaces an attractive park that was valuable to the area, etc. Could be good for the buyer, but bad for the neighborhood. > since our world is run by people who think in zero-sum terms. Not sure where this is coming from?
goodpoint 5y ago
Because artificial scarcity is artificial.
germinalphrase 5y ago
Can any experienced sale people share any advice on career paths within tech sales? I am considering a career reboot come June, and sales is one path I am exploring. Are there certain types of software companies, products, or sales environments that you would recommend with regard to TC, lifestyle, and/or career satisfaction? Alternatively, red flags to be aware of?
alexellisuk 5y ago
Identifying an unmet need, getting a market fit for a solution, understanding what people are willing to pay are all counter-intuitive for engineers, but essential to make money. These are my recommendations to anyone who's here and not getting the traction they want, or are considering starting a business. The 1-Page Marketing Plan - Alan Dibb. The Right It - Alberto Savoia. Monetizing Innovation - Georg Tacke & Madhavan Ramanujam. Obviously Awesome - April Dunford
- zeptonaut22 5y ago
  Thanks for the suggested reading! I'll definitely check these out.
lr4444lr 5y ago
The main problem here is that houses and software have wildly different marginal costs It is "a" problem, I'll even admit a major one, but it's not the main problem. The main problem is the expectation of continual customization and improvement at the input of the customer. Imagine if houses were built by you contracting with the developer, and after the initial blueprint and plans were agreed to, every two or 4 weeks you came back with requests to do new things like "add a basement bathroom", or "push out the back another 5 feet and add a glass skylight there for a sunroom", or "change the roof tiling to something 30% heavier". Even without the regulatory hurdles and permits, nothing would get built as a sheer matter of physics. Blueprints and architecturally sound structures take some basic customer requests at the outset, and then make dozens of important, non-easily reversible technical decisions known to an expert to be required to support those requests. You can't just add on new customer-desired trappings without vastly compromising the quality of those assumptions for the original design. But that is the situation in modern "agile" software development, and why selling it is so weird - because nothing else we'd say requires professional skill is built this way, and the real profit comes from annual recurring revenue - not a one time sale. Even wedding cakes have limits to change after the initial tiers are baked.
- nradov 5y ago
  Talk to any general contractor who does high-end home remodeling work. Some customers literally do come in with extensive weekly change requests, sometimes even more extreme than moving an interior wall or adding a skylight. This isn't necessarily a problem; it's a hassle but gives the contractor an opportunity to charge a lot more than the original price quote.
- zeptonaut22 5y ago
  Our lenses are probably influenced heavily by what kind of software we work on (which I admittedly didn't dive into at all on the article). I work primarily on B2C software, whereas it sounds like you probably work on the B2B software. It seems like consumers tend to mostly accept the platforms as they are whereas businesses feel (perhaps rightfully) entitled to ask for changes in the software they use. Each have pros and cons, but the marginal cost of B2C software does seem a lot lower than B2B due to the expectations in service.
phkahler 5y ago
Most software is rented. As the author says it has effectively zero marginal cost. Commercial software is ostensibly using sales to fund future software development, but in many cases it's not really doing much of that. More and more I'm viewing software as infrastructure, and Free Software as one of the best ways to protect that. But that leaves a big challenge funding development.
datavirtue 5y ago
I was thinking "building software is more like writing a book" and a few paragraphs later they slide into the publishing analogy. I spent an entire year, 16 hours a day, grinding on a software project all by myself...and I shipped at the end. Having completed it, or shipped rather, I realized/felt that I now knew what it was like to be an author...working alone building something through discovery and pure creativity. I have been chasing that feeling again, for years. It doesn't come from building someone else's desired solution as a team member on a project. That is a totally different experience for the developer than building from the heart. At work, building software is sort of like building a house. In my home office it's like writing a book.
yboris 5y ago
My commercial, charityware ($3.50 to charity of every purchase), MIT open source software Video Hub App sells for $5 with about 100 customers per month. 4,000 purchases over 4 years since the launch. Unsure how common it is, but I want more people to be transparent about their products, so others can know the distribution of possibilites. https://videohubapp.com/en/ https://videohubapp.com/en/ https://github.com/whyboris/Video-Hub-App https://github.com/whyboris/Video-Hub-App
Existenceblinks 5y ago
> If you’re building software - particularly new software that hasn’t already found a market -this underscores the importance of being good at what you do: if you’re just average (or more precisely, just median), you’re creating zero value. I have a hard time selling my cool app, now i wanted to go back to my ex-boss. (tear of not yet unemployable)
photochemsyn 5y ago
Selling software is more like selling the blueprint to a house than selling the actual house itself. The blueprint may need to be customized for the local situation, just as software users may need to configure their software for their particular use case. Software runs on hardware, and probably the major cost should be the hardware, not the software.
wolftune 5y ago
This is just software folks trying to speculate about economics and not finding the right sources to make sense of things. The KEY distinction between software and house is abundance vs scarcity. Once software and house both exist, software can be used all at once by every single potential user. But the house can only be lived in by a few people at a time. Everything else about the economic distinctions flows from these facts. The "marginal cost" idea is correct but is a symptom of the fact that houses are *rivalrous* and software is not. I gave a talk about this recently with further context at LibrePlanet (so it's aimed at software-freedom advocates, keep that angle in mind): https://framatube.org/w/ssYsun1bEXuL1nm5cT9ckw https://framatube.org/w/ssYsun1bEXuL1nm5cT9ckw
hadlock 5y ago
Low volume enterprise software is effectively selling perpetual professional services for a company, with access/using a very specific proprietary tool. Selling the software is a lot like dating, the company buying your professional services wants to know who you are and how effective you'll be, before the commit to you for 3-5 years, maybe longer. If you were just selling an API to a voice transcription service, that's great but there's very little economic moat and now you're in a Race To The Bottom with every other voice transcription API service out there. At least with professional services, there's options for customization and the revenue stream becomes more sticky.
serverlessmom 5y ago
I loved this article! Breaking down the basics on the risks and rewards of software. We talked about it on our webstream today: https://youtu.be/19posUE1i80 https://youtu.be/19posUE1i80

219 points by zeptonaut22 5y ago

It's because the hardest parts of software involve connecting with other systems and soliciting your custom requirements. Imagine if you wanted to buy a custom car, but you wanted an "off the shelf from walmart" experience. "Hello, I'd like to buy a custom car." "Ok great, we have many over there." "Yes but you don't have any pink ones with cool designs" "Well, we could make you a pink one, but what design would you like to see on it?" "I don't know, maybe a Nascar design. Oh, no, what about a Harry Potter design?" "We can do that for you, but it will take a few weeks and you'd have to put a deposit" And now you aren't selling things off the shelf.

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jahewson 5y ago
Perfectly describes the experience of a startup staring to sell to enterprise!
- JoshTriplett 5y ago
  Except that the "Oh, no, what about" comes later, and repeatedly.
  - squeaky-clean 5y ago
    "Here's your Harry Potter car!" "Who are all these teenagers in robes on my car? I don't see Gandalf or Legolas or Gimli anywhere!"
- Jaruzel 5y ago
  I had exactly this experience many many years ago when I was just starting out. I'd written a small tool that enabled pop-up messages between [Windows] users on a network. It was protocol agnostic - as long as the users had a shared file area, it would work. This was back in the day when even internal email was new and mostly non-existent in the workplace. I sold it as shareware originally, but then a Big Fish came along and said 'we want a licence for 1,000+ users, but can you come in and meet us to discuss'. Seeing this as a pivotal moment in my entrepreneurial career, I agreed to meet them. Five minutes into the meeting they started rattling off a long list of features they would like added (for no extra fee). Somewhat shocked, I numbly agreed in principle that I'd look at implementing them for the next release. Once I had time to think about it, I realised that as a one-man-startup there was no way I could implement their requests, and had to back out of the deal. And that's the problem. The people with money assume they can ask for whatever they like and have no concept that sometimes it's simply unprofitable for the little-guy to deliver it.
  - hutzlibu 5y ago
    "The people with money assume they can ask for whatever they like and have no concept that sometimes it's simply unprofitable for the little-guy to deliver it." Thats a question of negotiating, isn't it? They can ask for whatever they like and you can reply with whatever you like. And then you find a agreement, or not. The problem in your case seems to have been more lack of confidence and experience on your part, because like you said, selling a licence for a existing product is something very different, from making a contract about new features. Otherwise a little guy can grow and hire more people to help him with a big contract, if this is what he or she wants.
    - Jaruzel 5y ago
      > The problem in your case seems to have been more lack of confidence and experience on your part yeah, I was like 23 at the time, and totally inexperienced. Had it happened now, 20+ years later, the conversation would have been totally different.
- tarsinge 5y ago
  "We are looking for an economic daily driver. Please find our written requirements": unrealistic mix of a F1 car and a semi-truck.
  - jsiaajdsdaa 5y ago
    If we just JIRA hard enough, we can break the laws of physics and propel a semi-truck at 187 MPH using only an electric battery and bike chain.
murukesh_s 5y ago
>"Hello, I'd like to buy a custom car." How did you even get that Qs coming? For a bootstrapped startup selling to enterprises figuring that out itself is half the battle
- jsiaajdsdaa 5y ago
  You are very right :) If you don't have an existing relationship with people who have budgets, my only guess is to have a blog that attracts inbound leads. I'd imagine x% of leads don't have a budget or buying desire though.

Maursault 5y ago

> Why is selling software so weird? Because it is not, but it should be, sold by the pound.

laurasia99 5y ago
Pound of flesh extracted by management from the developers? Sounds good for the games industry ;-)
deleted 5y ago
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bdavis__ 5y ago
by the sloc.
- throwaway889900 5y ago
  It is in government contracts!

riazrizvi 5y ago

Nice title. I don’t feel that the article delivers to the question raised.

sethrin 5y ago

Because intellectual property isn't.

bruce511 5y ago

So yeah, software is different to houses. Software needs huge [1] upfront spend in time and/or money. This means risk, and high risk comes with potential high reward. By contrast building houses, even at scale, is pretty low risk, but since its low risk the upside is constrained. In many ways software is a lot more like making movies. You have to do the whole thing before you see any revenue. Risk is high, most lose money, but a few make the big bucks. This model does favour those who can take on more risk - ie companies with deep pockets. Even there risk is mitigated - formulas are followed, safe casting choices, sequels etc. Smaller indie movies can still be wildly profitable, just on a smaller budget. Don't make Lord of the Rings, make The Blair Witch Project. For me, we started out mitigating risk by writing customized software others paid for. When we had no work we worked on our own stuff. Over time our own stuff paid enough so we stopped doing custom stuff. With every new project though we evaluate risk, try and keep it down, and so on. Mostly we mitigate risk by doing what we know, to our established market, (aka sequels). 5 years ago we had the opportunity and ability to enter a new market space and we discovered something new. 30 years ago we were selling the idea of computerising. We were competing literally with paper and pen. We often had to supply the actual computer - for some Companies it was their first, and only PC. While challenging, the upside to the customer was obvious and very valuable. Wheras This new product was going into a space with 3 established compeditors. While objectively better, the existing ones were good enough, and as the cost of change is high it has been a long road to get some traction, which we are slowly doing. That we could afford to persist was because the other side of the business was working well enough to pay us. So think day job, and side project (with the side project having 3 full time employees :)). The lesson - Today software isn't fighting pen and paper, it's fighting other software that is 10,20,or 30 years matured. The path we trod is not going to be the right path now. There are gaps, but doing the non-software things like marketing, customer analysis etc upfront is now much more important than it used to be. There are opportunities, but it takes a moment to imagine them, and a Lot of work to validate them, and most imaginations are incorrect. Doing the upfront work well will pay off multiple times later. Oh and don't give up the day job too early...google may think self-driving-cars are the way of the road future, but they haven't quit search. [1] huge is a relative term - what is huge for an individual might be trivial for a company.

5y ago

paxys 5y ago

While all of this is mostly true, this problem isn't unique to software by a mile. The model of high fixed cost, low marginal cost applies to pretty much every consumer good or service sold in the industrial age. If you think publishing the first copy of a piece of software is hard, try setting up a new production line in a factory, or opening a restaurant, or producing a music album or movie. Yes it is hard to break into a space that is dominated by large established companies. Yes you need a lot of up front capital. Yes you will need to differentiate yourself. None of this makes software a "weird anomaly", this is how business works.

vineyardmike 5y ago
Software still has the lowest marginal cost - the distribution cost is basically 0, unlike things like CDs. And unlike a movie or album, the value that can be extracted via software is much higher. There's tons of make-once sell-lots products, but you need factories and supply chains and all that crap, not just a cat6 connection. If you want to serve more customers, you need to buy more CDs. Streaming is better for content distribution, except the content still has limited value created (so limited price) since its often consume-once and has a limited life span - and digital content is basically "tech" even if its not quite SaaS. Tech is what it is because of how easy it is to create, and how much value it generates, and how low the marginal costs are. Nothing physical compares. I interviewed for a team at <Big Co> that was part of a 100 person org. They generated about $1B for the company by creating a portal to (essentially) sell access to the company's existing data. They said most of what they spent that 100 people on was building integrations into existing b2b enterprise apps so other companies could ingest it easier. The per-person value created (extracted?) at this org is astonishing, especially since most of those 100 people didn't actually add value to the root product, beyond making it easier to use.
- elliotec 5y ago
  > the distribution cost is basically 0 How do you figure? Surely you know the magnitude of ad spend on software products, not to mention hosting and scaling infrastructure. We're not shipping cd's to every mailbox anymore but a typical marketing budget + Heroku/AWS cost is likely far higher for a typical growth SAAS startup than AOL was dumping on their physical distribution methods in the early 2000s right?

galaxyLogic 5y ago

The weird part about software is that most of individual code-units (i.e. functions, methods) are not very specific to your product. Thus they could be part of another product as well And then you realize it's actually a huge waste that they are not used by other products as well. You are almost re-inventing the wheel most of the time you write a new function. The value is only in what your multitude of trivial parts do together. Maybe that's not weird, but it's peculiar, to software development.

dotancohen 5y ago
That is not peculiar to software development, even the most sophisticated F1 motor or Raptor engine is composed of five or six "simple machines" based on only three principals: wheel (wheel, pulley), lever (lever, screw), inclined plane (inclined plane, wedge).
- krisoft 5y ago
  How would you break down a coaxial swirl injector (an important part of the Raptor engine) into “simple machines”? Are the regenerative coolant pipes built into the Raptor’s nozzle a wheel, a lever, or an inclined plane?
  - dotancohen 5y ago
    > How would you break down a coaxial swirl injector (an important part of the Raptor engine) into “simple machines”? I didn't complete the Mechanical Engineering degree two decades ago, so you might want to consult an engineer. Preferably one at SpaceX )) Being familiar with only typical automotive electromechanical fuel injectors, which presumably operate on similar principals, I'd also like to see where the spring and solenoid are classified. The valve itself is obviously an inclined plane. > Are the regenerative coolant pipes built into the Raptor’s nozzle a wheel, a lever, or an inclined plane? I'm not familiar with the Raptor, but from examining an RS-25 up close a few years back I would say that the intricate regenerative coolant pipes that make up the nozzle are not mechanical devices )). They are a component of a mechanical device, though, in the sense that they are bolted to the same device as the e.g. obviously mechanical turbopump is bolted to. Surely there's a certified engineer in the HN audience who could chime in.

m12k 5y ago

I'm running into a weird paradox when it comes to marketing - providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder. It is a meritocracy of sorts, but one optimizing the value extracted FROM customers, not the value provided TO customers. By having thinner margins, you are also able to pay less to have others promote your product, and that's what the digital ad market is optimizing for.

ensemblehq 5y ago
You’re right that cheaper services could affect customer outreach budgets and it does limit your options on what you can do (I.e. incentivized channels) but it also forces you to focus on other channels that suit your budget (I.e. content marketing, building relationships in forums, etc.) Also, price may not necessarily have to be fixed for all customer segments, you can use pricing as a strategy lever.
zild3d 5y ago
> providing a service more cheaply than your competitors doesn't make it easier to reach customers, it makes it harder. It can also make customers value your product less

interpenetrate 5y ago

The question contains a false premise. > Paging back through history, there have been very few opportunities for near-zero marginal cost goods. The only way that capitalism allows for the production of non-rival use values is by turning them into "club goods" and excluding access to them by state-enforced monopoly (intellectual property laws in this case). There's no shortage of examples of club goods. The three "downsides" the author lists as unique to club goods aren't unique to club goods at all. (1) All commodity production requires capital ("up front time"); (2) All new commodity categories are risky and only tested when they hit the market; (3) Breaking into any commodity category is next to impossible without sufficient capital.

usr1106 5y ago

Software is very close to math. Most people would agree that math should not be sold or licensed. How to add numbers is not something that should be paid for. If actually someone made their living by adding numbers we would probably agree they should be paid. So the programmer should be paid, the hardware should be paid, but the software not? Doesn't seem to work. Exactly like people expect everything to be free on the internet. Surveillance capitalism is one way to overcome the paradox. Not that I personally like it, but it seems to work.

WJW 5y ago
Since everybody learns basic math in school these days it has ceased to be something you can really charge for, similar to how it would be very difficult to charge for a software package that only copies files on a single computer or something like that. Applied math absolutely gets paid for, but it is a far cry from "adding numbers". Think new optimization techniques for a factory logistics package and things like that.
goodpoint 5y ago
> Doesn't seem to work It worked very well when it came to do all the foundational work for developing semiconductors, early computers, fiber optic, GPS, GSM, particle physics, CD/DVDs, CCDs, spread spectrum radio, solar panels... Research benefiting society needs was paid by society. It was paid by taxes.

bni 5y ago

A lot of software (most?) don't have zero marginal cost. Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. The real business is doing this by charging per hour to do those customisations. The base software is more or less a made up marketing story to be able to get a foothold. The most successful and established companies can charge a large up front fee (license).

jiri 5y ago
I agree but I am thinking this might be result of "being able to charge customer" approach. This model may be easiest way to charge every customer instead of haggle with customers with pay for base software which price is (f.e. wordpress) or often quickly falls to zero. More optimal way to create such software would be without customisations, but you cant do that cause you cant charge enough.
ihateolives 5y ago
> Every new customer (organisation!) that is onboarded must have their own customisations to make it useful for them. Meanwhile Adobe just rakes in 10-50$ per month on Creative Suite plan subscriptions from individuals and small businesses all over the world who are happy just to get access to the software.

zokier 5y ago

I think one major aspect is that software itself is rarely sold. Instead access to software (via license or saas) is what is being sold.

hyperman1 5y ago

Eric S raymond had a different way to explain this: Software is largely a service industry operating under the persistent but unfounded delusion that it is a manufacturing industry

simonh 5y ago
Simply having customers incurs costs in support. The more customers you have the more different hardware and OS patch and ancillary software configurations your app is running on, the more uses your app it put to, the more problematic edge cases in the UI and functionality and bugs will be encountered, the more feature requests you will get, the higher the chance that old versions of your app will be in use for longer. Eric's exactly right, you're providing a service and service costs scale up with users. Not all of them linearly, but some for sure.
0xbadcafebee 5y ago
It used to be manufacturing, back when you'd ship a cardboard box to a store once a year. I think the delusion we have today is that the internet-enabled model is somehow superior. It just seems to introduce more problems, and forces companies to expend a much greater amount of money, effort, and maintenance to get the same result consistently. I feel like the next great revolution will be selling updated software only once a year. No privacy implications, no persistent security concerns, no data hoarding, no advertising, no connectivity issues, no addictive social gamification or micro-payment or subscription service. Just a fully-functioning rock-solid program on your local device, developed by a small team, sold to millions of people. I'd pay premium for that!
- coldcode 5y ago
  My first product in 1987 sold in boxes, with floppies that had to be duplicated and a manual printed, plus shipping to distributors and mail order companies. If we were lucky we got paid 180 days later assuming they were sold, otherwise we had to pay to get the unsold inventory back. A later product with a larger audience cost $10 just to send an update, and that had very little profit, since it required all the same manufacturing costs. I never did that again.

Krisjohn 5y ago

Blogspam. Also, you're going to lose me a little if I'm just supposed to accept that your pricing model for your software is $x per month.

kitd 5y ago

Good article. This bit is interesting: The third downside is that, unless you can differentiate your product from what already exists, it’s going to be hard to find a foothold in the market. Given how many software products already exist, that’s a high hurdle to clear. It seems to me that, in any particular domain where there are several or many competing solutions, each with small differentiations, each differentiation takes on a disproportionate amount of significance. So it is possible to make a business out of fairly small differentiations from normal. Eg, through integrating with external systems or better UX for common tasks. And even better, it is often the competitors that have done the work for you deciding which external systems need integrating and what the common tasks are. Where the diffs are the USPs for all your competitors, it almost makes it easier for you to join in.

tluyben2 5y ago
Also, most people should let go of the silicon Valley or US mindset that success means 'a significant portion of your target market'. We do not all have to or want to be billion$ company founders or grow fast or have many employees; it is fine running a small SaaS that gives you 500k-1m revenue/year and you run on your own. Maybe not in the US (I know too little about the Healthcare and litigation parts), but in the EU, you can live and retire as a king with those numbers (provided you don't do things that are too stupid along the way). With such a company, you do not need much to differentiate to get 1000+ paying clients: you just probably will never get to millions of clients, and that is OK.

syl_sau 5y ago

I'd predicate the answer to this question on a much more materialistic basis than the author : it's weird to sell software because it's doesn't really exist. I mean, it's barely tangible. You can copy it indefinitely. It doesn't exist physically. It's much more natural really to buy, say, a painting or a house. You can hang it, see it, use it. You have exactly one house, exactly one of this painting. Software, compared to that, just feel lazy. One could argue that most software in history did not really improve anything, and that true innovation came from advancements in hardware, which software just took time to adapt to.

simonh 5y ago
How is that different from music, TV, movies. Is entertainment a real thing? What about education, is that a tangible commodity? That's the kind of thinking that lead Marx to his theory of value, and his belief in the parasitic nature of all economic activities except for making physical things.
- syl_sau 5y ago
  Concerts and plays are a real things that happen in the real world. So is teaching. They don't exist in a virtual space where everything is duplicable ad infinitum and where the next machine is just as capable as the first. Do you pay for music and movies on the internet? I don't, and most people do not directly. They go through platforms because otherwise people just avoid paying for them. Copyright and the Internet are kind of conflictual by nature, you probably know that. I'm not saying it's good or bad, i'm just saying things on a computer... it's weird to us. Everything is scalable on a computer, nothing really is in the real world, it feels like cheating. To me the debate is really about proprietary software and and the nature of computers. Where I live education is mostly free anyway, and artists are heavily subsidized by the state. Greatest artists of the past had benevolent patrons, for a reason. Actually I'm fairly familiar with Marx, not in a classic leftist way though. Not sure he could have predicted the whole information industry thing but I've always seen the whole GNU/Linx/free software paradigm as the only True Communism™ that exists, and maybe that's why paying for software is a difficult thing.

wodenokoto 5y ago

Was happy to see this wasn’t some rant about people not wanting to spend the price of a cup of coffee on your app. Instead it’s an exploration of the marginal cost of software and how that impacts the creators business. > The digital nature of software makes it extremely easy to ignore pesky distractions like customers right up until the moment you need their money to buy that expensive Icelandic yogurt you love. This quote comes right after a paragraph about how the closest thing to the near zero marginal cost of software is the publishing business. I think that book authors are in a similar position. Spend a year or two writing a novel with almost no idea If people wants to read it.

mihaic 5y ago

This analysis feels shallow, since it doesn't address the current landscape: it takes a lot longer than 10-15 years ago to get from nothing to revenue if you don't have a contract in advance, while most of the mainstream advice for software entrepreneurs is from a time when the barrier of entry was lower. The dificulty is mentioned, but probably requires strong emphasis and going into details (having a distribution mechanism before writing any code for instance). I often feel like even VCs and insiders are stuck a bit in the past, since their success came from a different ecosystem.

supert56 5y ago
I totally agree with this. Distribution is the most underrated, most difficult part of creating a tech company. In the UK Squarespace peddles the slogan 'a website makes it real'. This is very misleading. Making the website is the easy part, being found if you have no prior audience, no experience with SEO or a lot of money for ads is incredibly hard. In my opinion breaking into the tech world now is much harder than it was 5 years ago regardless of how good your product is.

tuxguy 5y ago

Fantastic read ! I have never had leverage explained so simply and succintly . The author really has a gift for great articulation.

bob1029 5y ago

> Low volume software is not a good business to be in. I disagree very strongly with this based on my experience so far. Being in the business of low volume software is fantastic if your customers are other businesses. The advantages of low-volume/complex B2B software biz are incredible to me. Contract terms are measured in half-decades. Your users can actually be trained and held accountable in many cases. You don't have to plan for nightmare public cloud scenarios. Your software will usually be running in some firewalled bunker with a guarantee of <10k concurrent users. When operating under these constraints, there are lots of fun ways to manipulate the engineering to your advantage (i.e. SQLite vs nightmare distributed abominations). Granted, low volume B2B software is just as worthless as any other kind if it doesn't deliver profitable value proposition to the customer. We currently sell software licenses measured in the 6/7 figure cost range (and get away with it because of the complexity of the business and value proposition). This means our little startup can hand-craft each customer relationship and carefully manage the sales funnel for optimal outcomes all around.

grvdrm 5y ago
I’d love to know what you build!
xmcqdpt2 5y ago
Similarly, the article doesn't take into account the fact that many developers work on in-house software and developer tooling that are not directly sold to anyone. Custom in-house development follows much the same principle as B2B products: the very high marginal cost are considered worth it by the business because of the degree of specialization they need or the advantage they gain over the competition. Of course I won't become billionaire off it but it's not for the lack of "value" I'm creating.
- marginalia_nu 5y ago
  Caveat here is that you need to be a sufficiently large shop for this to pan out. Need the economies of scale on your side. I've seen several times smaller organizations attempting to adopt this model (because Google does it or whatever), with the result of the tools team being an enormous bottleneck for the organization.

ngcc_hk 5y ago

How many users of swift ?

ianai 5y ago

Their point is interesting. Feels a little like the first mover take all outcome, too. Ie if software does do something dramatically helpful (has a truly killer feature) it’ll often push other entrants out. Thinking of you, Windows 95. I think this also underscores that programmers would benefit from some form of regularization. Like instead of a degree followed by a job, a close apprenticeship graduating into a junior membership in a programmer guild or union. Is anybody offering that?

_ZeD_ 5y ago

>>> If you squint enough, building software looks a lot like building a house. Ahahah No, It doesn't

21723 5y ago

The value-add distribution for software is not quite right. It never goes negative. Most software exists and can sell because it does things rich people who run corporations want done. That usually means it's good for them and bad for society, since our world is run by people who think in zero-sum terms. So it's a two-tailed distribution.

zild3d 5y ago
You're using a different definition of value than the author. In which, the housing distribution would also not be right. You can build a house that is extremely dangerous, blocks the sun on the neighbor's otherwise warm sunny pool, replaces an attractive park that was valuable to the area, etc. Could be good for the buyer, but bad for the neighborhood. > since our world is run by people who think in zero-sum terms. Not sure where this is coming from?

goodpoint 5y ago

Because artificial scarcity is artificial.

germinalphrase 5y ago

Can any experienced sale people share any advice on career paths within tech sales? I am considering a career reboot come June, and sales is one path I am exploring. Are there certain types of software companies, products, or sales environments that you would recommend with regard to TC, lifestyle, and/or career satisfaction? Alternatively, red flags to be aware of?

alexellisuk 5y ago

Identifying an unmet need, getting a market fit for a solution, understanding what people are willing to pay are all counter-intuitive for engineers, but essential to make money. These are my recommendations to anyone who's here and not getting the traction they want, or are considering starting a business. The 1-Page Marketing Plan - Alan Dibb. The Right It - Alberto Savoia. Monetizing Innovation - Georg Tacke & Madhavan Ramanujam. Obviously Awesome - April Dunford

zeptonaut22 5y ago
Thanks for the suggested reading! I'll definitely check these out.

lr4444lr 5y ago

The main problem here is that houses and software have wildly different marginal costs It is "a" problem, I'll even admit a major one, but it's not the main problem. The main problem is the expectation of continual customization and improvement at the input of the customer. Imagine if houses were built by you contracting with the developer, and after the initial blueprint and plans were agreed to, every two or 4 weeks you came back with requests to do new things like "add a basement bathroom", or "push out the back another 5 feet and add a glass skylight there for a sunroom", or "change the roof tiling to something 30% heavier". Even without the regulatory hurdles and permits, nothing would get built as a sheer matter of physics. Blueprints and architecturally sound structures take some basic customer requests at the outset, and then make dozens of important, non-easily reversible technical decisions known to an expert to be required to support those requests. You can't just add on new customer-desired trappings without vastly compromising the quality of those assumptions for the original design. But that is the situation in modern "agile" software development, and why selling it is so weird - because nothing else we'd say requires professional skill is built this way, and the real profit comes from annual recurring revenue - not a one time sale. Even wedding cakes have limits to change after the initial tiers are baked.

nradov 5y ago
Talk to any general contractor who does high-end home remodeling work. Some customers literally do come in with extensive weekly change requests, sometimes even more extreme than moving an interior wall or adding a skylight. This isn't necessarily a problem; it's a hassle but gives the contractor an opportunity to charge a lot more than the original price quote.
zeptonaut22 5y ago
Our lenses are probably influenced heavily by what kind of software we work on (which I admittedly didn't dive into at all on the article). I work primarily on B2C software, whereas it sounds like you probably work on the B2B software. It seems like consumers tend to mostly accept the platforms as they are whereas businesses feel (perhaps rightfully) entitled to ask for changes in the software they use. Each have pros and cons, but the marginal cost of B2C software does seem a lot lower than B2B due to the expectations in service.

phkahler 5y ago

Most software is rented. As the author says it has effectively zero marginal cost. Commercial software is ostensibly using sales to fund future software development, but in many cases it's not really doing much of that. More and more I'm viewing software as infrastructure, and Free Software as one of the best ways to protect that. But that leaves a big challenge funding development.

datavirtue 5y ago

I was thinking "building software is more like writing a book" and a few paragraphs later they slide into the publishing analogy. I spent an entire year, 16 hours a day, grinding on a software project all by myself...and I shipped at the end. Having completed it, or shipped rather, I realized/felt that I now knew what it was like to be an author...working alone building something through discovery and pure creativity. I have been chasing that feeling again, for years. It doesn't come from building someone else's desired solution as a team member on a project. That is a totally different experience for the developer than building from the heart. At work, building software is sort of like building a house. In my home office it's like writing a book.

yboris 5y ago

My commercial, charityware ($3.50 to charity of every purchase), MIT open source software Video Hub App sells for $5 with about 100 customers per month. 4,000 purchases over 4 years since the launch. Unsure how common it is, but I want more people to be transparent about their products, so others can know the distribution of possibilites. https://videohubapp.com/en/ https://videohubapp.com/en/ https://github.com/whyboris/Video-Hub-App https://github.com/whyboris/Video-Hub-App

Existenceblinks 5y ago

> If you’re building software - particularly new software that hasn’t already found a market -this underscores the importance of being good at what you do: if you’re just average (or more precisely, just median), you’re creating zero value. I have a hard time selling my cool app, now i wanted to go back to my ex-boss. (tear of not yet unemployable)

photochemsyn 5y ago

Selling software is more like selling the blueprint to a house than selling the actual house itself. The blueprint may need to be customized for the local situation, just as software users may need to configure their software for their particular use case. Software runs on hardware, and probably the major cost should be the hardware, not the software.

wolftune 5y ago

This is just software folks trying to speculate about economics and not finding the right sources to make sense of things. The KEY distinction between software and house is abundance vs scarcity. Once software and house both exist, software can be used all at once by every single potential user. But the house can only be lived in by a few people at a time. Everything else about the economic distinctions flows from these facts. The "marginal cost" idea is correct but is a symptom of the fact that houses are *rivalrous* and software is not. I gave a talk about this recently with further context at LibrePlanet (so it's aimed at software-freedom advocates, keep that angle in mind): https://framatube.org/w/ssYsun1bEXuL1nm5cT9ckw https://framatube.org/w/ssYsun1bEXuL1nm5cT9ckw

hadlock 5y ago

Low volume enterprise software is effectively selling perpetual professional services for a company, with access/using a very specific proprietary tool. Selling the software is a lot like dating, the company buying your professional services wants to know who you are and how effective you'll be, before the commit to you for 3-5 years, maybe longer. If you were just selling an API to a voice transcription service, that's great but there's very little economic moat and now you're in a Race To The Bottom with every other voice transcription API service out there. At least with professional services, there's options for customization and the revenue stream becomes more sticky.

serverlessmom 5y ago

I loved this article! Breaking down the basics on the risks and rewards of software. We talked about it on our webstream today: https://youtu.be/19posUE1i80 https://youtu.be/19posUE1i80