Yesterday I saw a tweet by Frank Scavo:
Chatting with a vendor about implementation cost to software license cost ratios.What followed next was somewhat of a diabate (sic) by me with Frank and Dennis Howlett.
Only today I found out I missed half of what Frank said, because I kept swapping between Twitter web and TweetDeck - Lessons Learned for me to never do that again while in the middle of a conv. Sorry Frank, you're an angel, given the benefit of hindsight, and I thought you were pretty OK even before that...
Back to the topic: there is a clear, direct and fairly linear relation between the initial cost of a product, and the additional cost(s) involved servicing it. In IT, every day life - everywhere.
I was painting the front of my house yesterday, thinking about this post. The brother of an old friend of mine used to "pose as professional painter" whenever he needed money. He'd go to big mansions, tell them they needed a paint job, and make them an offer. Usually, the people were glad and gave him the work
The secret to that? Asking a lot of money! "For a regular house, I'll ask 1% of what I estimate the house to be worth", he said. "If it's a bit more wood, I'll double, sometimes even triple that."
I was stunned. I always (I moonlighted a bit as jack-of-all-trades back in those days) used to estimate the work in hours and material, put in my rate et voila. Not him - he sometimes made 200 euro an hour just painting...
Ages ago, my wife went to the garage with our old car, and came back with a huge bill: double the then current value! The car was pretty old and had one, at most two years to live, and they installed a completely new exhaust pipe, brand new tires all over, and whatnot. I complained, but they didn't care. So I wrote a letter (yes it's really long ago) to the company's CEO, got a response and 60% off the price - he also agreed the cost of the service was too high given the value of the product itself
I bought myself a new laptop yesterday, a budget one costing less than 500 euro, for my new startup. A soon-to-be ex-colleague asked me on Twitter: "No SSD?" and I responded:
No, minimum required size would be 64 GB = 120 euro, being 1/4th extra. I'll put my swap mem on an SD, way cheaperThe (admittedly very sexy) hard disk would be 1/4th of the current price of my laptop! No way...
In big IT companies, there isn't much enthusiasm to be found for selling Open Source products. I always wondered about that, and asked around. I got always the same answer: "The software costs are so low that our sales tariff sticks out like a fly on the wall". Even when I tried "Yes but they would even make money given the fact that they hardly have to pay for the software!" I'd get that look - yes you're right but this is just how it is (viewed upon)...
In IT, there are socalled packages. SAP and Oracle are examples of those, and they "pre-cook" applications: HR, Financials, Call-centre, etcetera. I've always been a bit jealous of colleagues who worked with those applications because they have a higher salary, period. Which felt a bit frustrating because sure, they specialise, but heck, they also monoculture. When Baan died, most Baan expert "died" along with it, because it was all they could - which proved my point of the monoculture and the narrowness of their point of view
Still, they made more money than I did because the rates were higher - simple as that. Now why are the rates higher? Because the product is more expensive.
"It is a complex product" they say - that can't be the case, a package is supposed to be simple and save you time: that's why you pay upfront for functionality that's already there.
"We have to tailor-make it to the customer's needs" - big deal, that's what we COBOL / Java / .Net and whatnot people do every single day - and we're still cheaper
- In Switzerland, they fine relative to your income - that's why people don't mind getting a $290,000 speeding ticket
- Taxes are relative to your income
- Damage deposits are relative to the item price itself
- Down payments are relative to the total sum