“Technology is becoming too cheap to meter”

says Chris Anderson at Wired. And he encourages “waste is good” by invoking Moore’s Law and the impact it has had on cheap personal computing.

Two basic flaws in Chris’s arguments

a) Moore’s Law does not apply consistently across technology spend. Outsourcing and telecomms in particular, and most software do not have a “lower prices increase volume” mentality. You have beat it out of them. Microsoft list prices for its Dynamics or Office products have not changed much for years. You have negotiate higher discounts each year to get any semblance of Moore’s Law out of them. Most outsourcers have inflation clauses and fight like hell to pass along any productivity gains in their performance. HP continues to charge $ 5,000 a gallon for ink for decades old printer technology. AT&T’s international roaming charges are the ultimate salute to Moore’s Law – salute as in flipping the bird by refusing to budge even as around them Skype and alternate providers can deliver at a fraction at their rates.

b) He extrapolates what we can get as consumers to corporate world. You and I can get storage at $ 100 for a ITB. For that price, I know several corporations that pay that much for 1 GB over 3 years. Sure, it is Tier 1 storage - much different grade than what you and I get, but that’s also 1,000 times the price. You and I can get a single Geek Squad visit if we have a home computer problem. Most corporations sign up for multi-desktop, multi-year support contracts at massively higher price points.

I look forward to the day when enterprise technology is too cheap to meter. Because that will be the day I am out of a job and I can go fishing full-time…

Comments

[Tom Foydel]

I could not agree more. What we will see in the future is consumer clouds that start to look more like corporate clouds. To the degree that a cloud service employs human beings it will have to ask for a price and then raise it.

The one thing I keep thinking about in this context is cable tv. When it first started it was commercial free - that's why you paid for it. The same thing will happen to consumer web software. When we get tired of the advertising, they will start offering commercial free web - for a fee.

[Jon Reed]

I like Chris Anderson, and he is a smart dude who has carved out some success, but with his book "Free," like his last book, "The Long Tail," he has become fixated on a premise and now all relevant data must be funneled into that premise and forced to fit. This can work to the detriment of credibility. For example, Anderson had to eventually admit that his Long Tail premise was deeply flawed, especially when it came to the notion of the "little guy" leveraging the long tail to succeed in business. The long tail works, yes - for behemoths like Google and Amazon, less so for everyone else.

Anderson is doing the same thing with this book, Free, which has some very valid ideas (including some I have seen work in my own business) but in particular, I don't believe this book is "enterprise tested" and so you'll find many holes in it from the perspective you offer the IT market in this blog. What Chris does sells books but I'm not sure it brings precise, market-tested insights for the enterprise.

[Nitin Goyal]

I am no big fan of Chris, but the fact is that storage, bandwidth and processing power is indeed getting more abundant and cheaper every day. We may of course not be able to leverage this abundance in terms of Outsourcers as they are labour intensive and not having an automated or scalable model. I do not know how much longer anyone can run with a business model that is not taking the increased flexibility the consumers have due to this triple play (cheaper broadband, processing and storage) into consideration. Microsoft Dynamics is a case in point, but so are Google Apps and Zoho which are lower priced and offer rich features as well. You raise valid points about corporations paying more than stray consumers for these "utilities" and maybe this shows that there is a business model or an idea up for grabs.

[vinnie mirchandani]

Tom, Nitin - agree but to both of your points about services/outsourcing being exempt from Moore's Law..that excuse has been used for too long. Automating routine steps, offshoring, six sigma etc should yield productivity improvements year on year...

[Bart Jaspers]

"...Microsoft list prices for its Dynamics or Office products have not changed much for years..."
well meanwhile (July 20th) - is has been beaten of of MS :-) as we all know.

Having abundance of any kind, goes hand in hand with commoditizing (<> specialty products/services). Commodities have their own marketing challenges. To my belief, the many product / services that are considered to be special (hence high pricing / margins), will become a very common thing in the near future because of the ever increasing "informatization" (obviously using the internet as free distribution channel).

Think of drug development or mobile phone companies or insurance companies or... many of these sectors will be challenged by this new wave of openness.