Comment by quickthrower2
6 years ago
I thought about ideas like the post here myself, although I admit I haven't thought about it in the detail they have there and I am look forward to reading that fully over the weekend.
Anyway I don't think piracy is the problem per-se, but the question is: what is the commodity?
Because take Netlify for instance - picking on them, but you will see this sort of pattern everywhere:
1. Generous free tier to get you hooked. 2. $29 / month for something that costs $0.01 in terms of cloud compute. 3. $100 / month for something that costs $0.10 in terms of cloud compute.
Etc.
So really they are creating a fake scarcity and mark up stuff ridiculously.
But with local-first as I see it, you will get stuff like "filling in forms" or whatever software that has made companies into multi-million companies for free. And you will deploy that on cloud(s) of your choosing with no effort, and pay their pretty cheap per-transaction costs. Stuff that is trivial will rightfully become very cheap and commodity like.
This is probably a good thing for consumers, because for cloud companies and new startups to compete they'll need to offer truly innovative products. Do stuff that was really not possible before. Quantum computing for example.
That generous free tier probably costs more to run than all the paying customers combined, depending on how generous we're talking and the proportion of free to paying. There was likely also no revenue for a significant time, but still salaries to pay, and other costs to be borne.
If you really think the profit margin is 99.96% for that tier two customer, it should be pretty easy to create a competing business to provide the trivial service and charge a lot less. Like $0.02 and have a 50% profit margin :-) But I think you're underestimating how much it costs to run a business, even if compute costs are cheap.
I’m not thinking in terms of business here. Look what has happened to iPhone apps. You can get all sorts of great apps for free. Writing an app, no matter how hard it is is no longer enough to be a business. Look at open source: people spending half their lives writing free programming languages. When was the last time someone purchased a compiler?
The tech ideas talked about in the article could help commoditise at the saas level. You’d no longer need an engineering team because the app is designed to work with generic cloud services. The engineering is done by digitalocean or whoever. The software is free or maybe $100 one off license for forms say. Like a desktop application of yore.
It’s a separation of concerns between features and infrastructure. A bit like desktop apps. You don’t need to buy a new computer for each app, so why pay a computers cost in cash every year for form filling or value add file storage or whatever.
2. $29 / month for something that costs $0.01 in terms of cloud compute.
The major cost for paid tiers is not infrastructure, but user support.
I was thinking development costs. It's basically free to run a computer program. And the hardware is relative cheap too, compared to developing the software. I think it's really weird that the price of software is a race to the bottom, which affects the quality of the software, and kills innovation. "Software as a service" sure have artificial costs, like two orders of magnitude higher price running it in the "cloud" compared to hosting it on a service provider of your choice. But how else are we supposed to pay for the developing costs? Via advertising!?