Subject: Re: Support as insurance
From: Bob Young <bob@redhat.com>
Date: Mon, 29 Nov 1999 00:49:12 -0500


This thread is getting as bad as the "is it free enough" 
threads.  You are arguing points that are based on false assumptions.
Or maybe not false, maybe just irrelevant assumptions.

Part of the problem is that everyone on this list knows too much 
about software, software development, and licenses than is good for 
them.  This detailed knowledge is not shared by software consumers, 
and so is clouding your understanding of why or why not the -typical- 
consumer buys software, software warranties, or support.

We need more marketing-dweebs on this list.  What they will tell you is
this:

Customers want solutions.  They don't want source code, or to have to 
learn the license terms (or the likelihood of that license being 
enforcible if you chose to break it), of the software they use.  
Hell, they'd prefer to live without software altogether if they 
could.  They only buy it (or buy warranties, or support, or whatever 
else it is you sell in the guise of software) because they believe 
that it is going to help them look after their customers better than 
their competitors do.

And they have little interest in becoming fully informed on their 
choices - after all they've got better things to do with their time, 
like look after their customers.

So they make decisions based on their perception of reliability.  
Which is why Microsoft, Oracle, IBM and other market leaders have 
wonderful virtual cycles going for them.  As they become bigger the 
typical software consumer assumes that the other consumers are buying 
their products because they are more reliable or higher value.

Whether or not your product actually is more reliable or higher value 
than the alternatives available in the market is besides the 
point.  Customers will buy -more- warranties from you for the higher 
quality software you sell - if, and only if, you can convince them that 
you are a more reliable supplier of solutions to their business 
problems than your competitors.

This is where the Tangled Web car analogy is an extremely useful tool 
(one of many, such as: the right distribution channels, effective sales 
forces, clever marketing, etc...) for the purpose of convincing otherwise 
skeptical consumers that purveyors of free software may be more 
reliable than purveyors of proprietary binary-only software.

Bob.


> Ben Laurie writes:
>  > Russell Nelson wrote:
>  > > Insurance is a bet.  You're betting that the disaster *is* going to
>  > > happen, and the insurance company is betting that it isn't.  The
>  > > reason they make money is because they're in a better position to
>  > > evaluate the risks than you are.
>  > 
>  > No, they make money because they amortize the risks across all customers
>  > and add markup. Even if I am completely in agreement with their risk
>  > analysis I may consider it worth the cost (i.e. insuring increases my
>  > expected expenditure, but reduces my maximum expenditure).
> 
> Some of both.  The insurance company has better information about its
> payouts than you do.  But still, if the industry is allowed to be
> competitive, then *other* insurance companies with the same
> information will compete that advantage away.  Fortunately, we have
> strong consumer protection in New York State which prevents such bad
> outcomes (for incumbent insurance companies).
> 
>  > I still don't really understand what point you are trying to make
>  > (except, perhaps that free software warranties will be more expensive
>  > that proprietary ones because most people won't buy them?)?
> 
> Or maybe even that most people *will* buy them -- it doesn't matter.
> What does matter is that the insurer will have to pay out on most
> policies he sells.  Keep that in mind if you try to sell support as
> insurance.  If anyone intends to do it, they will have to be subtle
> and clever.
> 
> At a minimum, I would say that no support claims will be honored for
> six months following the purchase of the support policy.  Are you
> asking "Well, who would buy it then?"  The answer is: anyone who wants
> support as insurance.
> 
> You could quite reasonably not provide any support yourself, but
> instead buy it from LinuxCare or a similar firm.  You're not selling
> the *support*, you're buying the risk for a negative price.
> 
> -- 
> -russ nelson <sig@russnelson.com>  http://russnelson.com
> Crynwr sells support for free software  | PGPok | Government schools are so
> 521 Pleasant Valley Rd. | +1 315 268 1925 voice | bad that any rank amateur
> Potsdam, NY 13676-3213  | +1 315 268 9201 FAX   | can outdo them. Homeschool!
> 



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