About 15 years ago I wrote an article (since lost) in a local business magazine that stated that the trend in Information Technology was moving toward a target market of corporations rather than individual PC’s. I predicted that the focus of this new model would be on centralized networks providing centralized applications where the winners would be the large corporations who could best divide the costs over their large organization and ultimately the classic “economics of scale”.
Small and Medium businesses, I opined, would ultimately be forced to pay a larger amount per dollar of sales or margin for Information Technology if they wanted to stay in the game. Ultimately they would be forced to pay up (this was during the naissance of things like EDI) and thereby the large corporations would have a big advantage.
I was wrong – and I was right….. (?)
I was wrong about how the cost of hardware, software and especially connectivity has actually dropped precipitously over that time period.
Instead of hardware and software being priced to benefit the “economics of scale” advantage for large corporations, much of the technology required to buy the key technologies that have developed since then, (networking, fast processors, cheap RAM and of course the Internet and Email), has been available at affordable cost to all sizes of companies (so far).
I was right however about the human cost that is becoming a wall that Medium and Small businesses will have difficulty climbing.
In fact in some ways it is at this that the entire IT industry is at risk. Large organizations will be able to spend what it takes to create their custom solutions while Small and Medium will be at risk of human costs out-stripping the business value of software development.
I hate telling Small and Medium companies that they can’t afford me. It is not that they don’t appreciate the value I can provide or the rate I believe I should be compensated at , rather it’s just that the custom software they ask me to build for them would take far longer and be far more expensive to create than they could justify (not afford, justify). On the other hand large corporations will pay for the same level of complex smaller applications because they simply are working from a much larger base of getting value back from their investment (my apps don’t care how many 0’s there are in a number). In addition large businesses will reach out to the Far East and/or Eastern Europe for cheap solutions (sorry about that comment).
The alternatives for Small the Medium businesses (and for most Departmental apps as well) are :
- Pay the price and accept that it is just a premium they have to pay to play….
- Ask for less bell & whistles….
- Lay a guilt trip on me to do it for less (works when it’s one of my relatives or friends unfortunately)….
- Try to find a cheaper local provider (the classic High School student on weekends maybe ?)….
- Continue to run the things the old way and maybe risk their whole business.
Once again this is where the tools in MS Office (most notably Excel and Access) can bring the possibility of cost-justified custom solutions. This is where the using of VS tools in my opinion will add overhead and complexity and costs to the development that cannot be justified in the market. It is especially in the maintenance process (despite the fact that they would provide a “safer” and more “professional” solution (please refer to my previous Blog)) that VS solutions will price the Small and Medium business out of the zone for much custom software opportunity.
If we create new technologies that drive up the costs per unit of productive custom software, to the point where nothing but Enterprise apps are economical, or if we drive down the rate of pay rate for those delivering the solutions to the point where those who deliver the skills can’t make a living, there will be a big market space not being satisfied (at least by Microsoft ;-))….. I think that would be a shame.