Patrick’s post on AppJet and my comment on their ability to make money made me dig up this old draft. Every software project you work on, whether it is in a startup or in a big company will eventually get asked the question – how will this make money ? Having thought about this question a bit, I think a much better question is – who will find this useful ? A subtle difference, one might argue, but I think it makes a big difference in how you design a solution.

The “making money” part has to be a side-effect of “build something useful”, so in that sense AppJet is on the right track. Promote money making to be the primary consideration and you will either end up in building a strong sales operation or a bad product (sometimes both). Selling is important and often a difficult task (one which programmers have very little appreciation for). However, it cannot be the foremost concern for a software project in it’s infancy.

If on the other hand you decide to build something useful, you will always focus on delivering something useful to a customer. Once you have succeeded at that, money is more likely to follow. More likely, not guaranteed. Google struck gold by building an excellent search engine, the ad revenue followed. That does not however mean much to all the other startups out there.

Finding a good answer to who will find this useful will contain clues on whether it will make money. The problem is, most of the time, programmers focus on tools other programmers will use. AppJet is an example. In my opinion, this is usually indication of something that will not make a whole lot of money. Examples include, the next big programming language, a compiler for the next programming language, the next big web framework, a framework for building frameworks, tools frameworks that build frameworks and other recursive framework related projects. These projects are ideally suited for open source and if successful, will end up in services and support based revenue streams at best.

Maybe AppJet will succeed with a lean, mean utility-like hosting model, differentiating itself from all the other hosting providers with a novel app development platform or maybe as Patrick pointed out, this is all just a big bubble.

I came across Nick Carr’s offer to get an advance copy of his forthcoming book The Big Switch on his blog. The premise of the book is a very interesting topic for me, I work on enterprise software and there are big changes coming in this space. To get an advance copy I had to be amongst the first 150 folks to send an email to the publisher. The book showed up last week in the mail. Very innovative way to get some buzz going, although my blog is probably at the tail end of the long tail. My part of the bargain is to blog about the book, so here goes.

The book makes for an engaging read when drawing parallels between the electric utility business at the turn of the nineteenth century and the IT industry today. The book also does well as a survey of the different approaches being used by companies to supply software and hardware as a service. Nick builds up to the notion of a World Wide Computer and it all flows nicely. The author then tries to tackle some very complex and thorny topics and they prove to be overwhelming. Topics like the economic and social impact the World Wide Computer will require a lot more pages and a much deeper analysis than the book provides.

The book tries to maintain a neutral tone and succeeds when describing the past and the present. Nick’s predictions on the other hand, tend to be of the doom and gloom sort. Nick does not believe in the when a job is lost in one place, two more get created elsewhere theory. He believes that the World Wide Computer will cause far bigger economic upheavals and jobs will stay lost, millions of them. Disturbing stuff, that I don’t really want to believe in (maybe I should). The IT industry is going to expect and extract enormous efficiencies from hardware and software, folks are going lose jobs in large numbers as these efficiencies kick in.

The best example the author has is this site here. Apparently, this entire site is operated by a single guy who rakes in 10,000 dollars a day at times. The entire revenue stream is based on ads. Examples like YouTube and Craigslist are also cited, very successful sites based on very few employees. These companies highlight the highly skewed distribution of wealth that will occur. 60 employees of YouTube make 1.6 billion, all the suckers who put their content on there get a thank you note.

If these examples suggest a macro-trend then all this is indeed bad news. Good old large corporations sound benevolent by comparison. But, I am not convinced that this is a macro trend. I had read
another book on economics the week before last. This book had a whole chapter
on economic incentives and how they govern our behavior. The suckers who put their
content on YouTube don’t have much to lose right now, at some point they lose the incentive to participate and things are going to work out differently. These community based valuations seem suspicious anyway. EBay seems to be finding out that buying communities like Skype is not a viable business model in the long run.

People will not participate if there are no economic incentives. Open source programmers write code for free because there is someone paying them, maybe not for the open source code, but for something they do for an employer. Take away that job and there will be no free open source code anymore.

In the end I wish the author had not diversified as much and focused on a few topics in greater depth. Should you buy the book ? Sure, buy it. It will get you started on thinking about the future of IT.