Sunday, May 21, 2006

The Value Proposition of Large Development Organizations

There are huge potential markets in the developing nations, e.g. India, China, and most of the rest of Asia, as well as most of the former Eastern Bloc countries (which used to be part of the developed world, but so it goes). But for these markets, labor is cheaper than capital. It is easier to devote a dozen engineers to a job than to buy a solution, because hard currency is difficult to come by, but motivated and talented engineers are numerous. So: in these potential markets, the ratio of availability of highly skilled labor to capital is the inverse of what it is in the developed world.

Nearly ten years ago I recall sitting in a lab late one night happily debugging a problem with an embedded project, using what I estimated at the time to be maybe $500,000 worth of diagnostic equipment. I was surrounded by scopes and analyzers and such. I thought: "This is great! There is no way I could do this kind of work on my own."

Today, my current project requires a laptop and a broadband Internet connection. All the software tools I'm using -- except for Windows XP, because that's what I have on my laptop -- are open source.

This really alters the value proposition for large development organizations. They may still fulfill a crucial role, mostly in terms of project management and interfacing to the marketing department, but in terms of providing infrastructure in support of development, not so much. So: open source changes the value proposition of the development organization, and drastically lowers the cost of entry into product development.

If a corporation in the developing world wanted a technology Thing, say, a PBX, it would be a lot cheaper for them to use an open source Thing, like, say Asterisk, even if it meant it had to devote a bunch of technical folk to support it. An added benefit is that these technical folk learn this open source Thing, and can build an industry around this open source thing, because the cost of entry into an open source industry is so much less than it used to be for the traditional Thing. So: instead of being an emerging market replacing the saturated U.S. and E. C. markets, they become a competitor to the traditional supplier of the Thing.

If your product has become commoditized, it is time to find a new product. If the tools you use to create your product have become commoditized, then maybe it is also time to find a new product.


Jim Van Meggelen, Jared Smith, and Leif Madsen, Asterisk: The Future of Telephony, O'Reilly, 2005

United Nations, World Population Prospects - The 2004 Revision - Highlights, February 2005

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