Subject: Re: appliance-based business models
From: "Stephen J. Turnbull" <>
Date: Wed, 26 Oct 2005 11:41:46 +0900

>>>>> "Joe" == Joe Corneli <> writes:

    Joe> You're the expert, not me.  But remember the context in which
    Joe> I spoke up.  I had just read:

    Joe>  Another appeal to the appliance model is that you're
    Joe> charging for the value you're providing to the customer - not
    Joe> for a markup on your costs of doing business.

OK, well, I took your quote out of its context and focused on the
words.  I still think that it's applicable, but it wasn't really

    Joe> Why would the appliance model per se lead to this way of
    Joe> thinking (if what we're talking about here is a way of
    Joe> thinking)?

It doesn't.  In fact, in terms of "ways of thinking", appliances
probably make it easy to think in terms of markup over cost; I'm
simply emphasizing the need to get away from that, and think about
charging what the market will bear.

I think that Brian's later comments about "justifying your fee"
vs. "charging" can be linked to what I wrote about cost control.  Of
course you cannot simply charge what the customer is willing to
pay---he may very well want to pay less than your cost!  So you must
plan for a minimal margin over cost.  But if you do the accounting
properly and the costs mount up, it's very tempting to say "it's a
great product, if we can't do it for less, nobody can, so cost plus
20% is a fair price and _therefore_ the market will bear it".

School of Systems and Information Engineering
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