Subject: Re: the value chain
From: Crispin Cowan <crispin@cse.ogi.edu>
Date: Fri, 10 Dec 1999 17:25:13 +0000

"Stephen J. Turnbull" wrote:

> >>>>> "Crispin" == Crispin Cowan <crispin@cse.ogi.edu> writes:
>
>     Crispin> "Stephen J. Turnbull" wrote:
>
>     >> Ouch.  Please to be careful.  They are devices which function
>     >> to replace _labor_ with (physical, not financial/Marxian)
>     >> _capital_ by providing the same _service_.
>
>     Crispin> Sure, your version is more precise. I was thinking of the
>     Crispin> case where a wealthy family would have servants to do the
>     Crispin> work at the beginning of the century, where as most
>     Crispin> people at the end of the century have devices instead.
>
> Service != done by servants.  Service == flow of consumables or
> productive inputs (aka "benefits" in another thread).  Using the words
> correctly makes it easier to make good decisions.

Ok, clearly Stephen has the more correct terminology here.

Back to the point:  the 20th century's massive growth in manufacturing &
technology has resulted in a major shift from benefits delivered explicitly
as services by humans (servants, telephone operators, elevator operators,
etc.) to benefits implicitly delivered as services from small-scale capital
goods (toaster ovens, door bells, phone switches, washing machines, etc.).

This illustrates that injecting goods *into* the service chain often reduces
delivery cost.  I can deliver toast to you much cheaper by delivering a
toaster oven to you for a one-time $25 charge than by charging you $1 each
time you want some toast.

Similarly, people currently outsource many IT functions.  As someone said
yesterday, the birth of the ISP business started this.  Currently, almost
everyone outsources their connectivity (ISPs), many outsource their web
service (virtual web hosting) and there is a growing trend to outsource
business logic (ASP, or "Application Service Provider").  While ISP business
is likely to stay outsourced (if you bring the wires in-house, then they
don't go anywhere :-) it is entirely possible that another shift in the
TCO (Total Cost of Ownership) of web servers and application servers may well
cause an abrupt end to outsourced services like web hosting and ASPs.

Or maybe not.  I think this outsource/insource mamba is closely tied to the
thin-client/fat-client pendulum that has occurred over the last 20 years:

   * vt100 (DEC) and tn3270 (IBM) terminals (thin clients)
   * workstations (fat clients)
   * diskless workstations (medium clients)
   * x-terminals (thin clients)
   * PCs (fat clients)
   * web-based client-server systems (things that look like thin clients
     sitting on top of your fat-client PC :-)
   * hand-helds (Palm VII, web-enabled cell phones) (true thin clients)
   * java stations (thin clients)

Technology has shifted over time, making it variously more efficient to do
your computing at either the client or the server.  Similarly, I suspect that
technology will shift over time, making it variously more efficient to pay
experts to do your computing for you, or do it yourself because it has become
too easy to pay for.  Not many people have servants any more for making
toast.

Crispin