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The Implications Of Software Commodity?
Posted by
simoniker
on Mon Mar 08, 2004 06:00 PM
from the the-sun-never-sets dept.
from the the-sun-never-sets dept.
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."
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of course.... (Score:5, Insightful)
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.
Sure you can....... (Score:2)
You can if you clone it.
Re:Sure you can....... (Score:2)
"If God had intended man to fly, He would not have invented Spanish Air Traffic Control."
-- Lister
Re:of course.... (Score:2, Insightful)
and software doesn't just grow on trees either, it has development costs that must be paid for somehow.
Re:of course.... (Score:5, Insightful)
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?
Parent
Re:of course.... (Score:4, Funny)
You forgot that every time you copy software illegally, an angel gets his wings ripped off and baby jesus cries (for 3 hours.)
Parent
Re:of course.... (Score:2)
Re:of course.... (Score:5, Interesting)
The ultimate goal of programmers is to eliminate the need for programmers, through intelligent software that reprograms itself according to need. I think the ultimate goal of business should be to eliminate the need business. I think we will reach a point, through commodification and automation, where the necessities of life are trivial and at least some of the luxuries are cheap. The only people capable of making that happen are open-source types who create because they want to improve the world.
The business world in general is going to become like the music industry, keeping prices high through artificial scarcity, enforced essentially at gunpoint by a bought government. An ominous undertone of the free and opensource software controversy is the theme that only businesses should be allowed to threaten other businesses. The idea that providing jobs is more important than eliminating the need to do the work itself may be disguised as morality, but the real motive is to keep a few people in castles no matter where the rest of us have to live.
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Re:of course.... (Score:3, Insightful)
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 eter
Re:of course.... (Score:2)
In 1948, the same technology would have cost millions. Hell, even the electricity bill would have run into thousands. It may not be possible.
Let's assume this wonderful copying machine costs on the same order as a PC and reduce the copying costs to raw materials and
Re:of course.... (Score:5, Insightful)
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Re:of course.... (Score:5, Interesting)
Getting off topic here, but the point is, just because software can be copied quickly doesn't make it any less valuable to produce, and that value to the consumers is what defines a commodity.
Parent
Re:of course.... (Score:3, Interesting)
Inherently when something becomes a commodity you cannot charge as much for it. Imagine if the cost of cars scaled the same way. Granted cars are a very bad example since they have no really changed in price at all. Just arguably more features.
Still, how do people make money producing a commodity? There are many ways, refer to sugar industry execs for lessons, same with coffee, and for that matter all the crops. You ma
Re:of course.... (Score:5, Interesting)
as is the notion of scarcity, well as the fiction
of the "Law of Supply & Demand". This is no where
better exposed than in the writings of Thorsten Veblen, a unique & much neglected U.S. economist & social critic. This little excerpt for your gestation is from his "The Engineers and the Price
System" (1921):
The mechanical industry of the new order is inordinately productive. So the
rate and volume of output have to be regulated with a view to what the
traffic will bear -- that is to say, what will yield the largest net return in
terms of price to the business men who manage the country's industrial
system. Otherwise there will be "overproduction," business depression, and
consequent hard times all around. Overproduction means production in
excess of what the market will carry off at a sufficiently profitable price. So
it appears that the continued prosperity of the country from day to day hangs
on a "conscientious withdrawal of efficiency" by the business men who
control the country's industrial output. They control it all for their own use,
of course, and their own use means always a profitable price. In any
community that is organized on the price system, with investment and
business enterprise, habitual unemployment of the available industrial plant
and workmen, in whole or in part, appears to be the indispensable condition
without which tolerable conditions of life cannot be maintained. That is to
say, in no such community can the industrial system be allowed to work at
full capacity for any appreciable interval of time, on pain of business
stagnation and consequent privation for all classes and conditions of men.
The requirements of profitable business will not tolerate it. So the rate and
volume of output must be adjusted to the needs of the market, not to the
working capacity of the available resources, equipment and man power, nor
to the community's need of consumable goods. Therefore there must always
be a certain variable margin of unemployment of plant and man power. Rate
and volume of output can, of course, not be adjusted by exceeding the
productive capacity of the industrial system. So it has to be regulated by
keeping short of maximum production by more or less as the condition of the
market may require. It is always a question of more or less unemployment
of plant and man power, and a shrewd moderation in the unemployment of
these available resources, a "conscientious withdrawal of efficiency,"
therefore, is the beginning of wisdom in all sound workday business
enterprise that has to do with industry.
To read the rest of this essay see:
http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/veb
His analysis of the relationship between "big business" and the application of science & technology is first rate even if his suggested resolution seems more fanciful today than when he
first proposed it.
Parent
Re:of course.... (Score:3, Insightful)
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 o
Meditation on the breakdown of the commodity model (Score:3, Insightful)
Commodity also implies both mass supply and mass demand, although these are rarely in equilibrium.
Calling software a commodity implies that it is interchangable.
Re:of course.... (Score:5, Interesting)
Commerce, like creativity, is brownian motion. Don't hold back society because you're afraid the stock prices of last centuries monopolies will drop.
Copyright is simply artificial scarcity for software. We have enough scarcity in the world.
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Re:of course.... (Score:2)
Actually food copier does exist. Want more apples? Take the seeds plant them and wait a while (the copy process is slow :)).
Unfortunately the cost is still pretty much the same.
But I have heard of farmers being sued for planting genetically modified seeds (which were patented), even b
Re:of course.... (Score:3, Insightful)
Ooh, extra points, I want some! (Score:5, Funny)
Re: Empires... empires... empires... (Score:4, Insightful)
Parent
Re:Ooh, extra points, I want some! (Score:2)
Try this instead (Score:5, Informative)
One SENTENCE! (Score:5, Funny)
(Hey! I just did it too! Can I have the karma bonus as well? Nevermind the karma. Just visit my website and support the Creative Commons.)
Lessons in history (Score:5, Insightful)
Re:Lessons in history (Score:5, Interesting)
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/.'ed Text (Score:5, Informative)
Commodity
The word commodity is used today to represent fodder for industrial processes: things or substances that are found to be valuable as basic building blocks for many different purposes. Because of their very general value, they are typically used in large quantities and in many different ways. Commodities are always sourced by more than one producer, and consumers may substitute one producer's product for another's with impunity. Because commodities are fungible in this way, they are defined by uniform quality standards to which they must conform. These quality standards help to avoid adulteration, and also facilitate quick and easy valuation, which in turn fosters productivity gains.
Karl Marx considers commodities important enough to begin his book Capital with a discussion of them. The first chapter concludes with a discussion of what he terms "the fetishism of commodities," from which the following quote is taken:
A commodity appears, at first sight, a very trivial thing, and easily understood. Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties. So far as it is a value in use, there is nothing mysterious about it whether we consider it from the point of view that by its properties it is capable of satisfying human wants, or from the point that those properties are the product of human labor. It is as clear as noon-day, that man, by his industry, changes the forms of the materials furnished by nature, in such a way as to make them useful to him.
Marx asserts that commodity markets are more about power, politics, and even religion, than they are about their actual underlying resources. Commodities exist to facilitate exchange (and, since this is Marx, to subjugate the laborer). They are a way to build up an abstract world in the image of commerce, rather than reflect a more natural order for the world. Commodities are a reflection of the politics of human values: the contracts by which commodities are defined, and the standards that form the foundation for such contracts, are more important than the inherent quality of the commoditized thing. This is a very important lesson to learn, and one which the open source community should heed when marshaling its limited resources.
Commodity, the bias of the world
Shakespeare, of course, always has something to say.
Here is a soliloquy that concludes Act II of King John on the topic of Commodity. It is delivered in the play by the bastard son of Richard Coeur de Lyon, who has just convinced England and France, at war with each other, to suddenly strike an opportunistic political bargain and ally themselves against the city of Angiers:
Mad world! mad kings! mad composition!
John, to stop Arthur's title in the whole,
Hath willingly departed with a part,
And France, whose armour conscience buckled on,
Whom zeal and charity brought to the field
As God's own soldier, rounded in the ear
With that same purpose-changer, that sly devil,
That broker, that still breaks the pate of faith,
That daily break-vow, he that wins of all,
Of kings, of beggars, old men, young men, maids,
Who, having no external thing to lose
But the word 'maid,' cheats the poor maid of that,
That smooth-faced gentleman, tickling Commodity,
Commodity, the bias of the world,
The world, who of itself is peised well,
Made to run even upon even ground,
T
Oh yeah? new form of karma whoring (Score:5, Funny)
"To MP3 or not to MP3, that is the question:
Whether 'tis GNUer in the mind to suffer
The slings and arrows of outrageous coffee with no sugar
Okay, do I get points now?
Commodities: Low Cost vs. Standards (Score:5, Interesting)
With regard to price competition, OSS seems to have a big advantage. Free beats proprietary on price any day. The only interesting question is whether OSS software makers are more cost-efficient ($/line-of-code) at developing new software than are close-source vendors. Perhaps this will come down to a competition between developing -world OSS developers who work parttime for free for OSS versus developing-world developers who get paid a fraction of the labor rate, but work full-time for commerical software vendors.
With regard to standards, I fear that Microsoft has made itself the de facto standard inspite of all the open standards bodies. Even the web seems to be moving into the MS camp. Websites are developed to display well in Internet Explorer, streaming media is often only available in Media Player, everyone uses MS Office, and soon many might be forced to use MS trusted computing. I'm not sure how open standards can re-assert themselves to commodify the playing field in terms of non-MS-controlled "standards."
Software won't be a commodity as long as one player controls the standards because one player has monopoly marketshare and everyone neds to be compatiable with that standard.
Commodity the way gasoline is a commodity (Score:5, Insightful)
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?"
Parent
Re:Commodities: Low Cost vs. Standards (Score:2)
Or as long as there aren't any true standards. I usually compare software to marriage: before getting any software you must get to know rather well what you are thinking about, and be really sure about your intentions. Shifting from one software to another is often as traumatic as getting a divorce. My company a few years back changed from an in-house accounting software to SAP. It took from six months to a year before they got it r
Re:Commodities: Low Cost vs. Standards (Score:2)
now i think we're a little biased here on slashdot because we want operating systems to be a commodity. but even if linux and windows shared the same executable format (100% compatible), they still
software == bullets, snipers not a commodity (Score:5, Insightful)
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 (Score:2)
You're preaching to the choir - but there are so many companies where developers are isolated from the problems they solve by inept management
After reading the article (Score:2, Funny)
Strongly disagree (Score:5, Interesting)
As others have already noted - and which was noted in "IT doesn't matter" - is that the issue with packaged software is that everybody can buy it for a reasonably small price. In so much, it by definition becomes a commodity. However, packaged software covers only a small portion of the market for software. In-house solutions and so forth could not be considered a commodity if they provide a sustainable competitive advantage for some particular company. Imagine a software toolkit which allowed a company to estimate, with 99% accuracy, the future movements of markets in which they compete. It would be laughable to consider such a piece of software a commodity.
So what's the point of all this. I think what Open Source has done is pressure the big software houses to become more innovative than ever before. It's not good enough to come up with a good idea (a la MS Office or MS Windows) and tack feature after useless feature onto it just to get people to upgrade. Companies then need only buy software upgradesto "keep up with the Jones." However, there isn't any competitive advantage in this, and the economics of IT has borne that statement out - nobody has ever really revolutionized their companies using IT. What the software houses need to do is envisage IT products in terms of months of useful life, and not years, or even decades. The key issue here will become: "how long can this piece of software give me a competitive advantage before everybody has it?" Exclusive contracts with software houses will become the norm, before software is released "to the masses." Software products will be canibalized within months by the same company that originally produced it. Sales cycles will decrease to days, rather than months or years as it stands now.
Finally, for-profit companies will need to mobilize to head off the threat of Open-Source. Intrinsic motivation is a hard battle to fight, and software companies will need to fundamentally change the way they approach HR issues and corporate reporting hierarchies if they want to compete with a legion of programmers who write code because they want to and they enjoy it. Monetary compensation schemes simply can't bring that level of devotion to a task.
Yes, the software industry as we know it, and the software it produces, will become a "commodity." Companies that understand how to avoid this will just blow away their competitors by bringing fundamentally brilliant software products to market. And you know what? The customer, as always, will win, over and over again.
Bravo to Open Source for forcing this upon the industry.
Re:Strongly disagree (Score:3, Interesting)
Saying "software is a commodity" doesn't make sense, the word "software" covers too many things - sort of like saying "gas is a commodity". The gas you by from 76 is a commodity, the ga
Re:Software is (or should be) art (Score:3, Informative)
The economics of art are exactly the opposite of what we are dealing with. Fine art is based on unique objects (at best, limited editions). Outside of the fine art world, you're again dealing with mass produced products.
The exception is performance art. Are you suggesting that one can make a living as a programming performance artist?
*I just pulled this figure out of my ass.
google cache of original text (Score:3, Informative)
Lots of words ... summary (Score:5, Informative)
- Commodities are things that can be exchanged for one another. They are able to be sourced by and consumed by multiple entities.
- UNIX programs are commodities in a way due to the standardization of the core POSIX APIs.
- Document formats, such as the Microsoft
.DOC format, are going to change to allow documents to be used more as commodities.
- This is both good and inevitable.
It really didn't say a whole lot else. I mean, it was an interesting introduction, but I found myself looking for a page 2 on which the point would be made. Hrmph.Commodification of Data, more like... (Score:3, Insightful)
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? (Score:4, Insightful)
Re:What historical context? (Score:3, Interesting)
But look at how much things have changed in the past three or four generations. The industrial age has increased production of food and materials for much of the world. Travel became much easier and common among all classes of people.
Whoops, I meant to back up a bit further and mention Gutenberg's press first. It
'Commodity' (Score:2, Interesting)
You keep saying that word, but I do not think it means what you think it means...
Yes, usually a commodity is something cheap that has lots of competition- but that isn't the point. A commodity is 'something that is used to make other stuff(tm)'.
The point is that the good sold is used as an input to make other goods.
That used to be a 'big deal' when people with invisible hands were groping[for 42]... Now, ehh...
Oh, and I say Windows is not a commodity because it's not a good :)[neg. marginal utility=a '
Re:'Commodity' (Score:2)
Re:'Commodity' (Score:2, Informative)
Individual goods can be vastly demand-elastic compared with the composite market for that good, and NOT be a commodity.
The point that denotes a commodity is not the overall elasticity of the market. That's my point.
In a desire to be balanced- The reality of how the term is used connotes lack of differentiation and
uniformity, the unix api, the user (Score:3, Informative)
When we in the open source / free community develop and adopt a simple "good enough" user interface standard the same will happen in graphic programs.
I suggest that "eye candy" interfaces push mass desktop users away from our OS of choice. Push them back to MS word, excel, etc. A very simple and uniform user experience is needed.
in addition, I suggest: a interface standard will lead to more programming work, since a wider array of programs would be understandable to "average joe" users.
Therefor, I suggest that every desktop have two modes, the "hyper vanilla", and the personalized. At the click of, say, alt F1, the mode would toggle.
this would dramaticly ease tech support assistance and tutorial creation.
cheers
Reading the comments (Score:3, Interesting)
What can be commoditized is time; specifically, the time spent to create software. It can be rationalized, measured, spent, etc., and there is already an existing metaphor for compensating one for these various actions: the hourly rate. Software production costs time and money (or no money, as we'll see).
Read the whole discussion before you blow up.
In a sense, Free Software takes the whole paradigm of time having value and does away with it entirely. With Free Software, one cannot expect to receive money for the time spent. One creates software and turns it loose on the whole world, or some small portion of it and receives recognition (or not) from the receiving audience. Strictly speaking, if you receive money for developing something, it cannot be considered Free Software - somebody paid something for it.
In a sense, it is a slap in the face to software companies and to those of us who work for money. Free Software says that the time and money spent hiring a programmer and designers (or me) to produce a given piece of software was wasted: what y'all spent millions over the course of six months to develop, we can do for free in eight months or a year.
On the other hand, there is an argument to be made in favor of the greater public good. Software is expensive, and specialized software is even more so, perhaps out of the reach of some developing businesses. Certain types of software are important enough that perhaps they should be free, but determining which is an impossible task. An operating system - that's pretty easy; an MP3 player - not so easy. How does an MP3 player benefit the overall public?
To my mindset, money helps smooth over one of the basic problems of humans: ego. If we lived in a world where everything was produced freely and given freely, that would be great. But how do you compensate for that jerk down the road who sits on his ass all day and just takes and takes rather than giving back to society in some form? The answer is you force him to pay for the materials he uses and consumes. That requires money. Sure, he could work it off, but we've already established that he's a lazy bastard and won't work.
Thus, I have to come down in favor of paying for software. I don't think it can be properly commoditized in the same sense that sugar can. In fact, I'm not even sure there's a proper word for that type of a thing. What I do know is that certain forms of Free Software are a kind of slap in the face - saying that the time I spent and the education I paid for are worthless.
These are only my views. Pillory away.
Re:Reading the comments (Score:5, Interesting)
- I might say, "I am going to buy a J2EE application server." Hearing that, you need not assume I mean BEA Weblogic. There are a number of alternatives, and which one I pick doesn't really matter (at this level of decision-making, anyway).
- I might say "I am going to buy a relational database." There is no reason to assume I mean IBM DB2 -- but I might mean that. Whatever.
- I might say, "I am going to buy a disk defragmenter." There's no particular reason why that needs to be Norton Utilities. Etc.
If you have a bunch of products, and they're all perceived as being roughly identical and undifferentiated, then you have a commodity market. All that has to happen is for a free alternative to come along -- similarly undifferentiated, but equal in perceived value -- and the bottom drops out.Most software isn't quite at that level yet, though. Superficially it may be, but as I drill down in the decision-making process it becomes more complicated. J2EE application servers differentiate themselves not by the base server container, but by the add-ons the vendor supplies to do business processing. Databases do various sophisticated things, such as clustering and replication, and each one does it in a different way, enough so that you could defend a decision favoring one over the other.
Web server software isn't a commodity market, either. Apache isn't successful just because it's free. It doesn't have a lot of competition because it would take a lot of work to produce a product of comparable value, and Apache would still be free. Those that do try to compete, again, have to differentiate themselves -- e.g. Zeus is all about speed.
This article seems to be arguing that the ways in which Microsoft seems to be trying to differentiate its products -- e.g. through the Word file format -- are based on activities so mundane (legible documents) that their markets cannot possibly be defended against commoditization. Maybe that's true, I dunno. To sound the old "impending paradigm shift" trumpet seems a little melodramatic to me, though.
Parent
Re:Also available on synthesist.net (Score:2)