Posted by tibbetts
Wed, 04 Jun 2008 01:14:27 GMT
I just got back from the launch party for Buy It Like You Mean It, a startup non-profit that is "enabling the socially conscious consumer". I'm a big fan of what they are doing. As a free-market capitalist, I like to think that the power of markets can solve all kinds of problems. As a realist (and Wall Street technology vendor), I realize that market actors can have wildly different information and expertise.
Consumer goods suffer greatly from this problem. They are produced and distributed by large and complex organizations. Consumers, particularly in traditional retail settings, have little to go on but what it says on the box and the brand. And in recent times, brands have become commodities themselves, with everyone from Martha Stewart to Sesame Street selling their name. In order to make this market work, we need better technology at the point of sale.
Enter Buy It Like You Mean It.
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Posted in Business | 1 comment
Posted by tibbetts
Sun, 13 Jan 2008 02:50:13 GMT
Catching up on email this Saturday, I got the opportunity to take a survey about my experience evaluating Bungee Connect. Evaluating bungee connect has been something that has popped onto my radar several times. They purport to be an application platform for web applications. They have their own language, their own ui toolkit, their own (browser-based) IDE, and their own code library and source control system. In my day job I create and sell a novel application platform (for streaming applications), so I like to look at new platforms on many levels. I signed up, and was shortly invited into the bungee beta.
Suffice to say the evaluation didn't go well for me. It isn't clear that there were any problems with the product. But I kept getting blocked by other things in the evaluation. I had trouble logging in. Trouble figuring out their programming paradigm. Trouble deciding what the tool is good for. And more.
After taking their survey, I decided to capture for myself what I learned about the my own bungee connect evaluation process.
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Posted in Business | 1 comment
Posted by tibbetts
Sat, 12 Jan 2008 14:32:00 GMT
If you haven't heard already, Steve Jobs is expected to announce on Monday that iTunes will begin offering 24-hour movie rental for $4. This is widely reported not just by traditional rumor sites, but by people like Salon. And, by and large, people have been complaining about the price. Including me. Digging deeper, I have an armchair economist answer as to why this price feels wrong.
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Posted in Media, Business | 2 comments
Posted by tibbetts
Sun, 02 Dec 2007 01:11:49 GMT
Most business books have only one good idea. In second-class business books, it's common to name the book after the idea, in the hopes of building some brand recognition. The Change Function fits right into this cliche, providing one good idea, the change function itself. Helpfully, Pip Coburn has the good taste not to pad is his book with many other ideas. Instead, he applies his one good idea to several case studies. If you just want the one idea, read the rest of this post (information wants to be free, after all). If you want case studies and details about applying the idea to an organization, pick up Coburn's book.
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Posted in Books, Business | no comments
Posted by tibbetts
Wed, 06 Jun 2007 11:52:00 GMT
A few weeks ago
Bruce Schneier discovered a classic economics paper, "The Market for Lemons". The paper describes the behavior of markets where sellers have detailed information about the products, particularly the quality of the products, that buyers do not have. It uses the example of used cars.
In these markets, the price buyers are willing to pay is defined by average quality of good. Buyers lack information, so can only assume they are going to get a product of average value. Unfortunately, this lower price drives the best products out of the market, because sellers (who know they have the best goods) won't accept that price. When the best goods are removed from the market, the average quality drops, the price drops, and the next best goods are removed from the market. The conclusion is that in these markets quality falls until it matches the amount of information that buyers have.
Bruce applies this principle of economics to explain why there are so many bad security products. But others in the blogosphere have picked it up as a way to describe other parts of software. I first saw it at David Anderson's blog, where he talks about the lack of information when hiring software engineers. The most stark application to the job market comes in a Reddit comment through:
I just realized that it applies to the IT job market. Here the seller (the applicant) has all the info about himself, while the employer knows nothing. So what happens is that companies expect the average, and pay accordingly. That's why people who are smarter than average shouldn't go on job interviews, because they'll likely to get below what they are worth.
In the IT market it also helps to explain the pervasive use of certifications. Even if they don't indicate that a candidate is good, they do cut out the bottom of the distribution of candidates (the truly terrible sysadmins). Since top people will have already taken themselves out of the market for these jobs, it's ok to alienate them. Removing the bottom people pulls up the average, so prices (salaries) presumably rise.
As much as I like thinking about the talent market, my favorite application of this meme is Reg Braithwaite's The Not So Big Software Design where he applies it to tract housing (a pet issue of mine) and by metaphor to custom software development. The customers for both new houses and custom software are definitely ignorant, and they tend to buy based on what we in the software industry call buzzwords. For new home buyers, these are things like granite countertops, en-suite master bathrooms, the number of bedrooms, etc. Builders optimize for these easy-to-observe items, at the expense of things that can be critical to livability or maintainability of homes.
It's a good discussion of the realities of custom software. The metaphor does tragically fall down though. At least buyers of used cars and tract housing can resell them to the next ignorant buyer. Companies are generally stuck with their custom software.
Posted in Software Development, Business | 1 comment | no trackbacks
Posted by tibbetts
Sat, 18 Nov 2006 14:30:00 GMT
I find the economics of enterprise software to be quite interesting, but have never had a theory of pricing that I really felt comfortable with. I'd like to present a new (to me) explanation for how price is deterimined.
Many people are uncomfortable with the concept of "enterprise software" as some how different from other software. To me, the important difference is that enterprise software is purchased by a large organization for use in a business-critical system that they will be stuck with for many years, possibly decades. The "enterprise" isn't so much in the software, as in the company that is selling it, from their sales and marketing through their services and support.
Enterprise software is also consistently of very high price. There are a couple of potential reasons for this. One is that the benefits of the software are large, because the company is large (value-based-pricing). Another is that the software is built for a small market of large customers, so even though it is duplicable like most software, its development costs much be recouped from just a few sales (cost-based-pricing). I don't think either of these is a good explanation. The benefits of enterprise software don't generally scale with organization size, since the software is frequently used by a single group or business unit which is no larger than many non-enterprise customers. And even products where the cost is easily recouped over many customers (Oracle, SAP) maintain high prices.
I submit that the price of enterprise software is high to provide incentive for companies to go through the enterprise acquisition process. Because the enterprise customer is going to be stuck with the software for many years, their costs will be dominated by their internal costs of support, maintenance, training, etc. To any given business unit, the value proposition for a piece of software might be clear, but organizations quickly learn that they must restrict purchasing authority, lest they end up with an unmanagable IT infrastructure. Enterprise customers establish processes for buying software with long timelines and signficant technical and political hurdles. The result is a process so difficult companies must employ full time experts (enterprise software salespeople) to manage it. Some large organizations even go so far as to have their own internal consultants that work with new vendors, to help them through the process.
To a software vendor, which previously had an infinitely sharable good, this purchasing process greatly complicates their business model. They are limitted in the number of sales opportunities they can pursue. They must compensate their sales organization. And they must expend signficant effort before there is any guarantee of revenue. So, in order to incent companies to work through their process in the first place, large enterprises must pay a premium for their software.
One interesting corollary to this theory is the application to Free and Open Source Software. With free software, the common case is to treat the good as sharable, make it available online, and charge nothing. If cost of software were a significant part of large enterprise purchasing decisions, then free software would be doing really well. But, in fact, the important aspect of software sales is not price, it is having a professional push the deal along, assuring that your software meets with each of their objections and concerns. Free Software, without any such advocate, doesn't have a chance against commercial software in many enterprises.
Realizing this, many companies who already happened to have enterprise sales forces are developing techniques for using selling free software to enteprises and claiming their prize at the end. Some startups, like MySQL and Redhat, have also gotten involved. However, the enterprice acquisition process is still slanted towards buying from traditional vendors who understand enterprise concerns. And unfortunately, with a free software product, a small company has little protection against an establish enterprise vendor taking over their product, as Redhat is experiencing recently with Oracle.
If this is all true, then there is a different approach to be taken by Free Software: internal advocates. Rather than pay vendors significant sums of money to sell them a piece of free software, enterprise customers could develop a system of internal advocates, who filled the same role. Much like sales people, they would develop expertise in the acquisition process, and personal relationships with IT buyers throughout the organization. Unlike sales people, they could advocate for a variety of products, and they would be in a position to identify new free software products long before vendors like IBM, Oracle, and Novell. I don't know of any organization with such a structure, but it seems likely to emerge.
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Posted by tibbetts
Sat, 18 Nov 2006 13:38:00 GMT
Had a few hours to kill in Midtown Manhattan today, and so took the opportunity to check out some retail that can only exist in New York.
First I went by the Apple Store on 5th Avenue, which I like to call the Mother Church (standard mall Apple Stores being known as the iShrine). I hadn't been there before. In person, it is quite impressive. The glass cube occupies the center of a previously open plaza. Reminds me of a NeXT box crossed with the Louvre, which is probably the point. Entering the cube, you are standing on glass over an open hole. In front of you is a cylindrical elevator, and around the elevator curves a glass spiral staircase. A worker (acolyte?) seems to be constantly cleaning the glass steps by hand. Decending the staircase, you enter the underground store.
The store is fairly large, probably 4 times the size of a standard Apple store. And it is completely full of people standing around large blond wood tables fondling iPods and laptops. In this way it is fairly similar to a regular Apple store. However, if you try to buy an iPod, a major difference becomes clear. There are no cashiers in evidence, certainly not between you and the door. But if you stand there long enough, a red-shirted Apple rep with a backpack and a handheld Symbol scanner comes by. He will then offer to sell you one of the iPods out of his backpack, swipe your credit card through his device, and you are on your way. A similar setup applies to laptops and presumably to desktop computers. The net effect is they can vary the number of "cashiers" in real time, deploy them around the store as appropriate, allow them to encourage customers to make a decision, and make the instant gratification of shopping at the Apple store just a little more instant.
Secondly, I went to Bloomingdales for the first time. I hadn't even been in a New York department store before, though I had been a few in Chicago. Much more so than any of the stores in Chicago, Bloomingdales reminded me what a department store was supposed to be, before malls and before they got killed by boutiques with good supply chains and big box retail. The most important difference between the Bloomingdales on 59th street and any department store I've visited in suburbia is not the size (it may actually be smaller) it is the sales people. I spent just a short time, checking out possible presents and looking at laptop bags. In that time I was approached by half a dozen sales people. And most interestingly, every one of them seemed intelligent and helpful, the kind of person who I would actually want to assist me with my shopping.
This is a level of service I have had trouble finding in Boston, though some of the stores at some of the high class malls in Newton can approach it. Obviously it is only possibly due to the density of rich people in Manhattan. But it is nice to benefit from it. I need to plan more time in New York for shopping.
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Posted by tibbetts
Sun, 29 Jan 2006 00:58:32 GMT
When
Apple announced the
MacBook Pro, my first reaction was not to any of the hardware changes but to the name. This machine represents the end of the PowerBook brand name, a brand that dates back well before the PowerPC processor, to
the first Apple notebook computers in 1991. I believed that PowerBook was one of the strongest brands in the high tech industry, and thought it was remarkably stupid to change it.
Yesterday at the
University of Michigan Futuretech conference I got a chance to ask someone from Apple about it. They gave an interesting justification: Apple wants the names of all of their computers to have "Mac" in them. It is important that unsophisticated consumers have a single identifier for all Apple computers. He repeated this justification like it came off a sheet of talking-points. And it does make sense.
Which leaves the big question: What are they going to rename iBook to? My guess is we will have MacBooks and MacBook Pros. Maybe we would have seen them already, if not for
rumored last-minute changes to the keynote.
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Posted by tibbetts
Thu, 26 Jan 2006 22:17:16 GMT
I was reminded again today of the number of smart people that have been swallowed up by Google. Google seems to have hired everyone in San Jose, according to Indeed.com's new job numbers. They have offices in New York, and I hear they are opening new offices in Philadelphia and Boston. They seem to be willing to acquire entire companies just to get their employees.
The big question is, what are they all doing? The stock market seems to think that they are secretly working on The Next Big Thing. Based on Google stock price, investors expect that any day now we will see a beta of cancer.google.com. "Just click here and our AJAX-enabled Web 2.0 service will cure your cancer." That isn't too far from the truth though. Google seems to be adopting a similar model to big pharma. They are doing drug discovery. But what they are trying to discover is the next big idea.
However, much like big pharma, they are failing. A large number of researchers packed into a company, with too many PhDs, is unable to justify it's cost. Sure, Google will produce neat new things. They've produced several. But when you consider that they employ thousands of people, several good ideas just isn't cutting it. But much like big pharma, Google has enough money to decide that next year they need 30% more innovation, and hire 30% more PhDs. Of course, that isn't going to work. Each new good idea is going to cost Google more and more money.
Most good drugs in the pharmaceutical industry come from startups. A biotech startup gets together a few good people who believe in an idea, does the preliminary implementation, and gets it through a few rounds of trials to show that it works. If it does work, a big company comes in, buys the idea, and applies their knowledge of scalability and marketing to finish the idea.
That is exactly what Yahoo is doing with Web 2.0 companies. They are letting startups be the proving ground for new ideas, letting them put the ideas through human trials, and then buying up the good ones. And since there is no FDA driving up costs, the companies (and their ideas) come cheap. Order of $10 million a pop. For $10 million, how many PhD-years can Google buy? Not enough.
Posted in Web, Business | 2 comments | no trackbacks
