The Implications Of Software Commodity?

comforteagle writes "David Stutz has written elegant piece over at OSDir.com titled 'Some Implications of Software Commoditization'. It explores the concept of commodification in a historical context while also seeking to discover lessons that might be applied to contemporary open source business efforts. David gets extra points in my books for including sugar, Shakespeare, open source, MP3s, and the British Empire in one article."

Comments

of course....

[Transient0]

like all property/physical world analogies to information, the differences trump the similarities in every attempt at relevance.

the fundamental issue being that you can't copy a pound of sugar from one box to another and still ahve the same amount of sugar in the first box.

Re:of course....

[ch-chuck]

you can't copy a pound of sugar

and software doesn't just grow on trees either, it has development costs that must be paid for somehow.

Re:of course....

[jfdawes]

The problem really is that the act of copying a piece of software is terribly easy and costs: The price of the electricity used to run the devices doing the copying plus the cost of wear and tear on the device plus the cost of the media used to store the new copy plus the cost of wear and tear on the media.

This is probably on the order of hundredths or thousandths (hundreds and thousands, yay) of a cent. For any piece of software.

And the old piece of software is still there, unchanged. The act of copying it does not destroy the original.

Some people may argue that the cost of research and development should be born by the user. They may be correct, who am I to say, however the only version of the software that has those costs directly associated it is the original.

Getting back to copying a pound of sugar. Just say we had a machine capable of copying the pound of sugar, given some carbon, hydrogen and whatever other raw materials it needed and electricity. Put the original pound of sugar (the one grown/ harvested/ processed/ researched/ transported/ etc) in the machine and "copy" it. Should the user of the copy have to pay for transporting the orginal to the shop where it was sold? Or just for the raw materials and electricity used in the copying process?

Re:of course....

[ewtrowbr]

You either missed to point, or didn't read the article. A commodity is roughly defined in the article as something for which there is broad demand. The interesting part comes with the networked interchange of the commodity. The analogy holds equally well for sugar and software. "the process of commodification frames the market conversation between consumer and producer"

Re:of course....

[Brandybuck]

The other major difference is the genericity of commodities. Bottled water is bottled water is bottled water, in much the same way that white sugar is white sugar is white sugar. Or as Bob Young would say, catsup is ketchup is catsup.

Unless you're a brand fanatic, replacing this diner's premium coffe with New Folgers Crystals isn't going to make any difference to anyone. But go recreate that classic television commercial by replacing someone's Mac OSX with a Dell running Linux and you'll hear quite a lot of outraged squawking. Heck, even secretly replacing the Korn shell with bash is liable to get you challenged to a duel with pistols at fifty paces.

Re:of course....

[DarkSarin]

This is correct. There is another point that is important to catch: if we get to the point where we can copy foodstuff as mentioned above, and software copies itself, we will also be able to cheaply replicate pretty much anything (clothing, etc.)

The question then, is what is left to provide jobs? My answer is this: education and entertainment. If we ever manage to solve the world's problems of food, clothing and other material goods, then the only things that will be of value will be education and etertainment.

But before we can get there, we must shift our mindset: we have to get rid of big businesses who exist merely to sustain themselves (there are several already who only exist because they have convinced someone that there services are of worth--indeed most businesses fit this model).

But if all material goods are easily reproduced, then its only a matter of time before they have no worth. Then, like diamonds, the only cost will be artificial.

At that time, we will be faced with the choice to accept the corporate overlords, or rebel and allow everyone equal access. I know what I will argue for.

Generally speaking, I am a capitalist, but if our technology goes far enough before we blow ourselves up, that economic model will need to pass also, as will all other current models. No clue what's next though, but I do imagine that it will be very different.

Re:of course....

[Gilk180]

Some people may argue that the cost of research and development should be born by the user. They may be correct, who am I to say, however the only version of the software that has those costs directly associated it is the original.

Getting back to copying a pound of sugar. Just say we had a machine capable of copying the pound of sugar, given some carbon, hydrogen and whatever other raw materials it needed and electricity. Put the original pound of sugar (the one grown/ harvested/ processed/ researched/ transported/ etc) in the machine and "copy" it. Should the user of the copy have to pay for transporting the orginal to the shop where it was sold? Or just for the raw materials and electricity used in the copying process?

The point that is being missed is that the original pound of sugar is a resource just like the carbon, hydrogen, etc. Without the original pound of sugar the copying machine would have nothing to copy. So why shouldn't the costs of producing the original poind be amortized to the price of the copy.

Saying cost to produce the original shouldn't go into the cost of the copy is equivalent to saying that the cost of the machinery to produce the copy shouldn't be included. Just because something is a one time cost does not mean that the consumers shouldn't pay for it.

The only difference with intellectual property (ie software) is that unlike a car or a pound of sugar, the majority of the cost of production is in up-front, one time, fixed costs, instead of variable costs that are paid to produce one extra copy of the product.

Re:of course....

[Artifakt]

If we make scarcity scarcer, then someday there won't be enough to go around, and only the wealthy will be able to afford scarcity anymore. At this point, War and Pestilence are having a tough time generating scarcity without motivating some people to reduce scarcity at the same time, and even Famine and Death seem to be on the brink of faltering in what was once an unbroken string of successes. Is this the future you want for your children? (Because it's certainly what I want for mine).

Lessons in history

[Un0r1g1nal]

While there are many lessons to be learnt from history, the human race in general seems not to care, actually let me rephrase that .. .. the people with all the money and the governments supposedly representing the masses but actually more likely on the pay check of said rich people/companies do not care in the slightest. They would prefer to opress progressive science by stopping technological advancement by whatever means necessary, because it would put a dent in their profits!!

software == bullets, snipers not a commodity

[puzzled]

The fact that software is approaching $0 in cost doesn't mean there are less jobs for software people, it just means that a great deal of what was purely IT 'territory' is now going to be dual role, with software developers having to know a portion of the business as well.

The large employers with their vertical silos inside the organization will fight (and loose) this change, while smaller employers everywhere are already reaping the benefits. Stop billing yourself as a 'software' guy and go get some background in operations accounting, marketing, logistics, whatever, but the days of the separate priesthood are numbered - your choices are a.) on top of the wave b.) not very palatable fish food.

I'm a sniper and while the target rich environment of the pre bubble economy is gone there are plenty of profitable things left to 'shoot'.

Re:software == bullets, snipers not a commodity

[Anonymous Coward]

Stop billing yourself as a 'software' guy and go get some background in operations accounting, marketing, logistics, whatever

I find it surprising how anyone could anyone think to call themselves a 'software' guy without these backgrounds? What exactly does this 'software' of yours do? I find that writing accounting, marketing, and logistics software requires me to become proficient in these backgrounds and many more. If your understanding of the software begins and ends with the source code control system, you're missing the boat. Development is about understanding the world through the solutions you code.

Re: Empires... empires... empires...

[bill_doors]

Since the beginning of the humankind, empires always has tried to repress freedom movements... fortunatelly empires always fall... is just matter of time... :)

Commodification of Data, more like...

[valence]

This article is interesting, but rather than the commodification of software, it's more the commodification of data that's really being discussed. His examples and ideas really concern data format standardization and that standards are what allow data to become commodities.

In that sense, I agree completely... demand for "market" in distributable music spurs the popularization of a standard and an infrastructure for distribution (e.g. peer-to-peer networks). And I definitely agree that software should be written to take advantage of economies provided by using standardized data.

Of course, it's kind of obvious that demand precedes standardization, since standardization takes effort and some kind of demand must exist (even if it's just a, "Hey, wouldn't it been keen if...") before people will get off their duffs to figure out, formalize, and make available a standard.

What historical context?

[192939495969798999]

How long has Shakespeare been around? 400 years or so? How about sugar? Well over 1000 years, right? My dad was in the room when the "first" computer program (calculating PI to 1000 places on the ENIAC) was run, and he's still using computers today. Any commoditization of computer software in the last, say 10 years, is surely coming on too fast to be compared with "historical context" that spans tens or hundreds of generations of humans. I would say that MAYBE 50-100 years from now, people could look back at today and make a statement like that, assuming that OSS doesn't go away in 10-15-20-30-40 years. There is just too much change right now to say anything concrete about where software is "going" (although I concede it's interesting to think about).

Commodity the way gasoline is a commodity

[Latent Heat]

Software is a commodity in the way a gallon of gas is a commodity -- if to run my car I had to pump in exactly 10 gallons of gas, and then I had to add exactly 10 ounces of a detergent additive, and there were several incompatible brands of detergent additive on the market, and everytime I wanted to fill the tank I had to read labels and figure out if I had the right kind.

I am thinking that OSS is a commodity in the sense that computer hardware was a commodity in the pre-PC days of CP-M and the S-100 bus. Jerry Pournelle had this mantra "iron is expensive, silicon is cheap" that a person would "invest" in a boat anchor cabinet, a good power supply, and an S-100 backplane and then plug in boards with memory, processors, and peripherals and upgrade the silicon while keeping the boat anchor iron.

This putting a computer together from parts required someone who knew what they were doing, and Pournelle plugged the idea of "system integrators", dudes who would in essence sell you generic hardware, but in their markup they were selling you a service of knowing what hardware was compatible with what and where to get the drivers for everything.

For all the talk of Linux weenies and lusers, the average Linux distro really is not an end user product, but it seems that the Linux savy could pull together pieces parts of software and put together systems tailored to the requirements of specific customers. You know, open and free software, but the money is to be made in providing services, and the service is being the propeller head who knows what software is out there and what works with what, and what configuration tweaks will make a customer happy.

The PC kind of changed Pournelle's model. The silicon was cheap, but the iron (cabinet, motherboard, power supply) started coming from Free China and later from Not-Quite-As-Free China and it became cheap, and with the business model of Dell, it is pretty much cheaper just to replace the whole system than poke around with doing your own upgrades.

As far as the software, the software has kind of moved away from this mix and match model as well. Sure, a Windows install may be as hard as some Linux distro installs, but who even installs software -- you buy the computer with Windows, Office, and networking already installed from Dell. So I guess the system integration has become a mass market instead of a cottage industry.

I am thinking that for Linux to catch on, there has to be some patron, some "angel", some big player to do the system integration and sell ready-to-run systems to the mass market. Is it Wal-Mart and Lindows? Is it SUN and their "Java workstation?"

Re:Commodity

[PunTrollCritic]

That's because I saw his very first post and created this account instead of criticising him anonymously. Read all his posts. They all suck beyond belief. Trust me, we are not the same person.

Meditation on the breakdown of the commodity model

[Ohreally_factor]

You're on the right track here. A commodity is usually defined as physical substance, such as food, grains, and metals, frozen orange juice, etc. which is interchangeable with another product of the same type. Equating Folgers with ground coffee is pushing it, but technically you are correct. The restaurant or diner is selling a hot brown liquid.

Commodity also implies both mass supply and mass demand, although these are rarely in equilibrium.

Calling software a commodity implies that it is interchangable. As Linux and F/OSS has grown and developed, it has become increasingly possible to substitute Linux and F/OSS for proprietary software.

Another quality of commodities is that they are priced pretty strictly by the market. Except in unusual cases where someone corners the market (and thus has monopoly control), the normal pressures of supply and demand determine price over time. If prices are high, others will want to profit, and begin producing the commodity. If prices are low, some producers will leave the market, decreasing supply. (Of course there are many other factors, such as the weather, that lead to shortages and surpluses. Trade groups can also collude to keep prices artificially high, basically operating as a monopoly.)

Because F/OSS can be distributed freely (as in free beer), and electronic distribution is so cheap as to be nearly free, it's somewhat of a misnomer to call it a commodity. When it is "sold" it is usually bundled with something else that gives it value. Hardware gives it value, IT sevices (development, administration, and consulting) give it value. The reverse is also true. It gives hardware value, even though it itself is free.

"Normal" commodities can be bought and sold on various commodity exchanges. Futures can be bought and sold. Physical objects can be exchanged. Also, because commodities are physical, there is a finite amount, even when there are huge surpluses. There is potentially an infinite number of copies of Linux, so demand will not outpace supply. Again, the limiting factor seems to be the supply of hardware and of support services.

Hmmmmm. Anyway, in case you couldn't tell, I'm thinking about all this as I type, so I don't have any conclusions or insights. Just more questions, really. Really a great topic. Too bad I couldn't RTFA.