"The economics of the software development business have always been kind of weird. Some things with software scale spectacularly, and some things scale very poorly. Pricing is always a challenge; it's hard to know when it is right. Even what, exactly, is being sold has always puzzled the best thinkers in the software business. And of course, open-source software throws a monkey wrench into the whole works."
"For the first few decades, all software was bespoke. IBM and others sold mainframes and mini-computers, and software was normally sold with the computer and customized for each customer. Eventually, larger firms had in-house developers who wrote software for their company's particular needs. There wasn't a broad market for software, so software was expensive and limited to larger companies that could afford the esoteric hardware needed to run it. Economies of scale were extremely limited."
"The economics of the software package era were interesting. Each version of a given software package was to be written, tested, documented, burned onto disks (floppies, CD-ROMs, DVDs), and delivered to a store before even a dollar of revenue was realized. Customers expected extensive documentation, making for a heavy, hard-to-transport product. (The famous Borland C++ 3.0 box was around a foot and a half long and weighed upwards of 25 pounds.) And in the early days, the documentation wasn't enough-customers expected and got free tel"
Software economics combine extreme scalability in some areas with poor scalability in others, creating persistent pricing and product-definition challenges. Early software was bespoke, bundled with mainframes and customized per customer, limiting markets to large firms with esoteric hardware. A US Justice Department unbundling forced software to become a separable product, and personal computers broadened distribution through retail stores. Software packages required development, testing, documentation, physical media production, and retail delivery before revenue, making upfront costs high. Customers expected extensive documentation and support, increasing product weight and cost. Open-source software later complicated traditional economics and business models.
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