Bill Gates' Open Letter


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It has been 40 years since Bill Gates wrote his open letter to the software industry complaining that computer hobbyists were stealing his BASIC program. That was so long ago that Wikipedia has a picture of the source code for "Micro-Soft" BASIC on paper tape. A lot of things have changed since then.

In the 1970s when Microsoft was getting started, it was common for people to copy, swap or donate software simply because they could. Especially in the hobbyist community such as the Homebrew Computer Club, people bought hardware and they got software in any way possible. It was easy because there was no security on the distribution media, and there were so few devices that could read the media it really didn't matter.

Gates' complaint was that hardware engineers make a living at what they did, and software developers had mortgages to pay too.

Over a short time, his vision became the industry standard, and it's hard to imagine the software industry today any other way.

However -- and this is a bit ironic -- it might be time to re-examine the sharing model in light of today's demand.

We know, of course, that today business software largely has migrated to the cloud and that for pennies we can get thousands of apps for our devices. The combination has made software virtually free.

All that software is aimed at the mass market and for tens or hundreds of thousands of users. Sheer market size makes it easy to price so aggressively because many titles really do make it up on volume.

One of the upsides or happy problems inherent in today's ubiquity of hardware and software is that many more people are engaged in making very targeted software that might benefit only a relatively small number of users, especially in business.

Businesses always have built at least some of their own software, and they have maintained much of what they acquired directly from vendors.

Nonetheless, business is still quite a way from covering 100 percent of its software needs. The reason today is the same as it was 10 or 20 years ago -- some apps are just not cost justified. The app that tracks a quirky business process in a department is likely built in a spreadsheet and the department limps along with it, but this is far from ideal.

Case in point: When sales incentive compensation was a spreadsheet app, all it did was track deals, commissions, splits and similar things. Its whole rationale was getting timely and accurate checks cut each quarter.

Since applications for this vital activity became available, the business process changed. Rather than simply being an app for end-of-quarter calculations, compensation management has become a tool for managers to track selling activity. Organizations that use compensation management now have another window on the sales process and a way to intervene when needed.

All of that relates to the current software license paradigm and to a future when that paradigm loosens its grip. Imagine a situation in which one organization develops a useful app and then makes the specification available in an online library for others to use. Why would it do that? you might ask. Because it might wish to borrow someone else's specification of a different app in the future.

That community sharing model is taking hold, and while it is still a small part of the industry, it should have quite a future. The model doesn't exactly replicate the free software model of 40 years ago because it introduces a paradigm of an entity paying for software through a barter system. Not only that, the model isn't even unique. It's a software analogy to 3D printing, if you think about it.

With 3D printers, people are able to print a wide variety of goods that were once purchased from manufacturers. Today a growing community of people is making 3D designs and offering them at modest prices to others. In this scheme, the marginal cost of producing something is roughly equal to the cost of raw materials, which is to say not much.

Today's software sharing model is as far from stealing a BASIC program as a CD is from paper tape. That's why it's a new paradigm and more a question of when it catches on rather than if.

Denis Pombriant is a well-known CRM industry researcher, writer and speaker. His new book, Solve for the Customer, is now available on Amazon. He can be reached at [email protected] You can also connect with him on Google+.

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