{"id":515,"date":"2007-05-15T06:04:25","date_gmt":"2007-05-15T14:04:25","guid":{"rendered":"http:\/\/www.vtiger.com\/blogs\/2007\/05\/15\/why-software-commoditisation-is-a-myth\/"},"modified":"2007-05-15T06:04:25","modified_gmt":"2007-05-15T14:04:25","slug":"why-software-commoditisation-is-a-myth","status":"publish","type":"post","link":"https:\/\/two.vtiger.com\/blog\/archives\/why-software-commoditisation-is-a-myth\/","title":{"rendered":"Why software commoditisation is a myth"},"content":{"rendered":"

Article\u00a0<\/em><\/p>\n

\u201cSoftware prices will eventually fall to zero. The open-source software movement has already started that commoditisation.\u201d <\/font>This pronouncement came recently from MIT professor Michael A Cusumano at a one-day Silicon Valley conference called \u201cThe New Software Industry\u201d. If that sounds too good to be true to corporate IT shops that are forever squeezed by software costs, well, yeah, it is. <\/font><\/p>\n

Shortly before the conference, I had dinner with open-source deep-thinker Eric S Raymond, author of<\/font><\/em> The Cathedral and the Bazaar.<\/font> Raymond told me about the essay he\u2019s working on now. His conclusion, put simply: software can\u2019t be commoditised. <\/font><\/p>\n

Are these guys both living in the same universe? Sure. They\u2019re just living on two different sides of Software Town. <\/font><\/p>\n

In Cusumano\u2019s commercial-software neighbourhood, the days of the software package with a stranglehold on its market are gone \u2014 and the reason is open source. Microsoft and Oracle may swallow their commercial competitors, but they can\u2019t buy out the persistent competition of free open-source software. <\/font><\/p>\n

The result: software is becoming a commodity, and prices will collapse. Cusumano thinks the only way software companies can survive is through services \u2014 either selling software as a service or offering add-on services along with their software products. So we\u2019ll still get squeezed, but for services instead of for software itself. <\/font><\/p>\n

It\u2019s hard to see how Cusumano could conclude that software prices will have to drop to zero \u2014 especially when clever marketing can sell a bottle of tap water for a couple of dollars.<\/font><\/p>\n

Still, software is becoming a commodity \u2014 isn\u2019t it? <\/font><\/p>\n

Across town in the open-source neighbourhood, Raymond says no. Open source isn\u2019t commoditising software, he argues \u2014 just modularising it. <\/font><\/p>\n

Software isn\u2019t like hardware. After 200 years of industrialisation, we understand the value of commodity hardware. We want standard nuts that fit on standard bolts, standard tyres that fit on standard wheels and standard memory that fits into standard motherboard sockets.<\/font><\/p>\n

Interchangeable parts introduce manufacturing economies of scale, while custom pieces don\u2019t add enough value to be worth the trouble. <\/font><\/p>\n

But software is far easier to adjust than hardware. Small tweaks can suddenly make software far more useful to some customers, but without the expensive retooling that hardware requires. The cost of differentiation is small; the value high. That makes software nearly commoditisation-proof. <\/font><\/p>\n

Instead, Raymond says, open source is forcing software to break up into modules \u2014 stand-alone chunks of software that can be plugged together. <\/font><\/p>\n

Modules don\u2019t have to be identical \u2014 just act alike. So as long as the interfaces are standard and the functionality matches up, an open-source module can replace one that\u2019s proprietary. <\/font><\/p>\n

And unlike hardware, software modules don\u2019t have to be physically in the same place to connect up. You don\u2019t need Google\u2019s software on your servers to create a Google Maps mashup. You don\u2019t need to know where Google\u2019s software is, and the mashup benefits from Google\u2019s ability to update the maps and the engine \u2014 as long as the module keeps the same interface. <\/font><\/p>\n

As Raymond told me, \u201cModularisation makes mashups possible\u201d. <\/font><\/p>\n

What he didn\u2019t say is that modularisation opens the door just as wide for proprietary software as for open source. Sure, an open-source module can replace a chunk of proprietary software \u2014 or, instead, modules from several different vendors can compete for the same spot, each with its own distinctive advantages for some users. <\/font><\/p>\n

That would mean no zero pricing, but maybe a lot more value for IT shops. It would mean no more one-size-fits-all, but a much better match to what our businesses need if we really can plug together the right pieces from proprietary, open-source and software-as-a-service sources. And just maybe it would mean there\u2019s still money to be made in Software Town.<\/font><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Article\u00a0 \u201cSoftware prices will eventually fall to zero. The open-source software movement has already started that commoditisation.\u201d This pronouncement came recently from MIT professor Michael A Cusumano at a one-day Silicon Valley conference called \u201cThe New Software Industry\u201d. If that sounds too good to be true to corporate IT shops that are forever squeezed by… .Why software commoditisation is a myth<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","neve_meta_reading_time":"","_themeisle_gutenberg_block_has_review":false,"_ti_tpc_template_sync":false,"_ti_tpc_template_id":"","footnotes":""},"categories":[3],"tags":[],"yoast_head":"\nWhy software commoditisation is a myth - Vtiger CRM Blog - Latest CRM Topics, Tips, Insights and Updates<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/two.vtiger.com\/blog\/why-software-commoditisation-is-a-myth\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why software commoditisation is a myth - Vtiger CRM Blog - Latest CRM Topics, Tips, Insights and Updates\" \/>\n<meta property=\"og:description\" content=\"Article\u00a0 \u201cSoftware prices will eventually fall to zero. 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