My alternative busines model

Niall Douglas s_fsfeurope at
Wed Dec 4 22:28:27 UTC 2002

On 3 Dec 2002 at 23:46, Alessandro Rubini wrote:

> > It is plain dangerous for software to be a service industry. You
> > will, in time, come to work for the lowest price which means mass
> > unemployment here and plenty of work in the third world.
> Actually, it happens to products. A lot of the cheap toys sold here
> are built in China, a lot of the commodity hardware I get comes from
> Taiwan. Exactly for the reasons you outline.

Precisely - manufacturing is done in China but the design is done in 
the occidental countries. There are a few exceptions among outposts 
of the west in asia (taiwan and korea mostly), but those in fact 
benefit the west more than asia because they force the US 
manufacturers to keep their prices down and thus lowering the overall 
cost to the economy.

> Services, on the other hand, tend to be more localized. TV programs
> are mainly made up in the same country, repair shops serve you best
> when they are local, same for travel agencies and legal consulting.

Those are residential services. AFAIK not many programmers are 
employed by a man in his flat, so you're talking pears and apples 
here - if you look at financial services for business, most of it in 
Europe is in London which is a good distance from Italy. Indeed for 
insurance it's split between New York, London and less so Hong Kong 
and Singapore.

Services in fact are just like any other part of the economy - they 
tend to concentrate where it's cheapest. Where there is not much 
difference because of locality, it comes down to language first 
(English), then price and then quality. I once worked a job where I 
had eight programmers sitting out in Pakistan and I was told to send 
any grunt work - any boring, repetitive programming - out there 
because they were cheap. I felt terrible for them, they were as well 
educated as any programmer and nice guys too.

If you hadn't noticed, european business is pushing very hard to have 
the cost of IT lowered. In this over the last few years, visa quotas 
have gone up and duties lowered on outsourcing IT to the third world. 
We are creaming off the best of their IT talent and farming out all 
the crappy work to the remainder for peanuts. In time, the cost here 
will become the bare minimum, all the R&D will be done in the US and 
we'll be no better off than the third world. I'm sorry, but I'm not 
liking that situation.

> What you should think about, in my opinion, is not a software package
> as a still item, that is bought and used.  It's more of a living thing
> that requires some (though little) human intervention to be actually
> useful to the final customer.

I do think it's living, as you'll have noticed in my alternative 
business model.

> And R&D costs is covered by service activity. Who offers a service has
> to be able to offer a better service over time. The cheap ones who
> can't do R&D will offer a worse service; some clients will choose one
> kind some clients will choose another.

Maybe you and I aren't seeing R&D as the same thing? I think service 
actively covers logical improvements and improved features, but it 
does damn all for radical improvements. It just continues on the same 
old broken paradigms, building more and more code which IMHO is 
fundamentally broken.

Computers could be three or four times more powerful today as BeOS 
gave a hint towards. It's just their software is broken and free 
software does nothing to help that.

> I'm not completely sure, but pretty confident this is the way to go.

Well it's hard to believe in free software and not think software is 
a service. I know what you're saying and for sure, plenty would agree 
with you but can you see why I feel free software doesn't do much for 
innovation? Reiser says some good things on this, he's said the 
filing system should be completely rewritten every five years and 
he's absolutely right.

> > Free software only makes economic sense if it's a service. I 
> > furthermore posit that it being a service is an extremely short-
> > sighted view with serious repercussions for the industry.
> If it's a service, you shouldn't talk about industry.  What industry
> do your refer to here? Hardware industry? Will they build less
> hardware when I can transfer my service (the OS) from the old computer
> to the new one without paying for it again and again?

Hardware's another issue, I was speaking exclusively about the 
software industry. In this, I mean anyone who writes or supports or 
documents software.

> Sure Free Software doesn't offer the high revenue stream that most
> proprietary licenses generate. But is this a problem for anyone except
> big corporations? 

Current proprietary is bad for everyone, I totally agree. But it does 
offer some small entrepreneurial chance ie; placing a bet on a step-
change idea and making it big. My model would do this much better of 
course, but my original point is free software doesn't offer this at 

> People and companies that now pay the software tax
> over and over will have plenty of money to invest in their fields of
> activity, possibly in the IT area if that can help them working
> better.  Those that currently don't pay the tax will be able to use
> technology nonetheless and thus work better, probably being thus able
> to invest a little in IT.

:) You have a very rose-tinted view of capitalism if you think that. 
What do you think companies and even people do with saved money? Well 
they spend it on other things, not more of the same. Software libre 
implies less overall spending on IT and do you know, I'm fine with 
that. I just want a system which offers just reward for taking a 

> What's the problem in distributed knowledge and programmers all around
> the place, as opposed to a big concentration of programmers in one
> place and few or none of them elsewhere?

I'm happy to see the knowledge spread around, and I think the asian 
mentality has a lot to teach us about how to write software. However 
software libre isn't going to help that - in most third world 
countries the proportion of study between proprietary products and 
free products is even higher than in the west - simply because a 
computer is expensive, if you have one you're going to study with it 
to get a good job and all the jobs are in proprietary products. As 
this trickle of outsourcing becomes a flood, that's going to become 
even more so.

These are other points and off-topic. My original point is software 
should be manufacturing because that can include an entrepreneurial 
element. Services are wholly who can provide the work the cheapest 
and second or third comes good quality. They can't by their nature 
include an entrepreneurial element.


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