David Stutz and Software "Commodification"

re: David Stutz and Software "Commodification"

Steve Hall — Tue, 09 Mar 2004 16:36:00 GMT

Oddly enough, the software market IS similar to the milk market...at least in California!

The milk market in California is an example of market forces (in this case, the California Milk Advisory Board and the Western United Dairymen) pressuring the state legislature into requiring certain "features" to be in a product, in order to prevent it from being commoditized. (Essentially, milk in California must be "fortified" in order to be called "milk". See the webpage http://www.moomilk.com/archive/feature_50.htm for details.)

This, along with the Milk Board's infamous "happy cow" ads on TV, help to distinguish California's "feature-rich" milk from all that (crappier?) commodity milk produced in other states (or Mexico).

Consumers have apparently been successfully convinced of the need for these "fortification" features in milk...or are just too lame to complain about $4/gallon milk prices. (The $4/gallon prices are justified by the Milk Board as being the increased cost to deliver this additional feature...)

Last year, there was another attempt by consumer groups (and milk producers in Oregon, Washington, and Mexico) to dismantle the milk fortification requirement, but after everyone heard from various medical professionals, became convinced once again that the feature was necessary.

Another great example of features in commodities would be food safety issues: here in California we routinely run into batches of fruit or vegetables that are imported from countries with lax laws about pesticide use (e.g., DDT) and produce cleanliness (e.g., E. Coli or Hepatitus A from farm workers hands). The knowledge that the produce came from a DDT-free field and was properly washed could certainly be considered a "feature" and deserving of a higher price. Consumers regularly pay MUCH higher prices for "organically grown" produce or "California grown" produce.

In short, "features" are "market discriminators" and obviously affect even what most think of as commodity products.

A great example of using "features" in discriminating similar products are those produced by Sony. Sony long ago perfected the technique of producing a "line of products": e.g., each year Sony has anywhere from 12-18 different portable CD player models, with varying features. They retire 4-5 models each year and introduce 4-5 new models each year...each with the newest features that their market research indicates will tap into the fad-buying consciousness of Japanese and American buyers. Essentially, they discovered that Americans are willing to replace their 2-year $30 CD player every 2 years to get more/better features.

In summary, "features" drive low-end commodity products even more in some cases than high-end non-commodity products.

re: David Stutz and Software "Commodification"

Eric Albert — Tue, 09 Mar 2004 18:10:00 GMT

A quick correction on the organization of Rotor -- David was our GPM, but for the last half of the project he was part-time. Geoff Shilling was our PUM. While David was a great evangelist and really helped get the project going (and helped write the book), Geoff was the leader.

Oh, and David's definitely a great guy.

re: David Stutz and Software "Commodification"

Matt Warren — Tue, 09 Mar 2004 19:20:00 GMT

David Stutz was a God, but not infallible. I would not agree that software is a commodity, or will soon become one. The best example is that most software is still written for specific vertical markets, and within that are huge markets for software customization of even those products.

Shrink wrapped products are the closest thing to a commodity, but only in as much as one can be replaced for another. To some people on the margin, OpenOffice might be an adequate replacement for Word because their specific needs require nothing more than a general text editor with a option to print. Most others, however, find themselves demanding more specific features, and certainly that's driven a lot of baggage into MS Word, but for every feature there's a group of users that can't live without it. You start to delude yourself into thinking these products are commodities because of their ubiquity. These closest you'll ever come to a commodity market for software like office or windows is if the US Government did find a way to break the company into different parts, or to force Microsoft hand over the code to different vendors. Unfortunately, this would only become a short lived artificial commodity. Eventually these separate vendors would compete on features, not price and soon specific versions would not longer be replaceable in any user's eyes.

re: David Stutz and Software "Commodification"

Derek — Wed, 10 Mar 2004 16:01:00 GMT

Computer software is not a commodity, but personal computers certainly seem to be -- or at least a certain segment is. Basic computers for home or small-business use are, in many people's minds, interchangeable. As long as it runs Windows and will read e-mail, surf the Web, etc., price is the determining factor in the purchase -- they don't care about Intel vs. AMD, motherboard chipsets, graphics processors, etc. That doesn't extend to Mac users, gamers, developers, and others for whom specific features are important and worth paying for, but for many other people one entry-level PC is as good as another.

It's the reason why Dell and local "white box" PC assemblers eat everyone else's lunch in the mass PC market: they can make substantially the same machine for cheaper than HP, Acer, and IBM. Laptops aren't yet quite commodities, but they're getting there.

re: David Stutz and Software "Commodification"

Derek — Wed, 10 Mar 2004 16:11:00 GMT

I should add that, for many people, DVD players _are_ a commodity. Yes, people who care and have done research will pay more for a DVD player, but in the general mass market of those who just want to watch a DVD from the video store, $29 is better than $150, and some will stomp other people nearly to death at Wal-Mart ( http://www.gizmodo.com/archives/010650.php ) to get the lower price, features (or lack of them) be damned.

re: David Stutz and Software "Commodification"

Ian — Sat, 13 Mar 2004 01:19:00 GMT

But don't some software components become commodities like these DVD players? Many years ago, you used to have to buy tcp/ip stacks. Or file and print services can be handled using Samba. For most people, the difference between WinDVD and PowerDVD is negligible. When the feature set is sufficiently ring-fenced, you do seem to get commoditization.

Mac Word Notes View and OneNote

Buggin' My Life Away — Thu, 18 Mar 2004 00:19:00 GMT

Mac Word Notes View and OneNote

Buggin' My Life Away — Thu, 18 Mar 2004 00:19:00 GMT

Mac Word Notes View and OneNote

Buggin' My Life Away — Thu, 18 Mar 2004 18:47:00 GMT

re: David Stutz and Software "Commodification"

Thu, 01 Apr 2004 16:32:00 GMT

On a side note:
"...some will stomp other people nearly to death at Wal-Mart (http://www.gizmodo.com/archives/010650.php)"

I thought that ended up being a scam. The woman was a con artist who did this sort of thing before.

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