[ILUG] Naive ADSL/WiFi questions (long (sorry!))?

[paul at clubi.ie]

On Sat, 23 Jun 2007, Josh Glover wrote:

> On 23/06/07, paul at clubi.ie <paul at clubi.ie> wrote:
>
>> So you'd think RedHat and Sun would have a stronger incentive to
>> release buggy products than MS, in order to garner greater support
>> revenue. However, that doesn't seem to be how it goes.
>
> Not at all. No one wants to actually supply support; they make their
> money off of selling the contracts.

Right.

That said there are two aspects to costs of support:

- high per incident costs
   - ie calls to support
- fixed costs (across customer base)
   - i.e. providing updates via the internet

I think you're referring to "per call" costs, which vendors would 
indeed want to minimise, by ensuring quality. As would customers..

Customers, I'd speculate, however reallly want the latter (if a 
problem crops up, they'd prefer there's already an update, rather 
than ringing in). The vendor has to put as much effort into creating 
an update for one customer as all - and the update is triggered by 
customer call, hence the "per-call" costs are effectively part of the 
"create updates" business.

There's some kind of tension there between need to minimise the 
former without minimising the other /too/ much. However clearly, the 
stable-state of this tension is that software vendors have a steady 
trickle of updates to release to customers..

> A support contract that is never used is 100% profit to the seller, 
> so the incentive to actually develop a superior product is higher.

Contracts that are never needed are contracts customers eventually 
learn they need not buy. RedHat takes the interesting approach here 
that their contract says "You buy support for /all/ your installs 
(and hence declare them all), or you're in breach", which mitigates 
that somewhat, but still.

There's a more dynamic interaction here between costs and 
updates-as-product than the simple analysis you've given suggests.

It'd be an interesting paper for an economics academic..

regards,
-- 
Paul Jakma	paul at clubi.ie	paul at jakma.org	Key ID: 64A2FF6A
Fortune:
Of course the writer of this is Polish and the drives are Hungarian ...

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