The Business of Software

Another Bubble?

The Nasdaq Composite is a stock market index which leans towards information technology stocks. In the last 5 years, the Nasdaq has risen from 4.8k to 13.8k, meaning that any investment would have almost tripled, and an annual growth rate of 24%! (calculated on Jun 6 2021). The big tech companies (FAAMG) are the five companies in the American economy with the highest market cap (= the most money invested in them).

DevOps and the Google way

The B2C paradox: Any investor will tell you that the real money is in B2B (selling to businesses), and that B2C (selling to customers) is much less lucrative, but B2C is what every naive startup founder thinks about because they know those types of businesses from ads and their own daily routine. So: How come most of FAAMG are actually B2C!? Imagine you have a B2B product or service that is 10x better than the competition: Most businesses will actually turn you down, because they don’t want to work with a new company that can disappear, might be locked into a contract, and just prefer the reliability and stability and human relationships of their existing provider. Plus, you’ll have to find a point of contact and do a honkin’ lot of convincing for each new business partner. Some even demand handing over your intellectual property (as AOL did with Google). Contrast that with B2C: Consumers will just switch to the product that is easier to use, and by going online you can instantly reach all 5 billion internet users. So it went with Google: People saw their search was more accurate by a lot, and didn’t have pay-for-placement, so everybody switched. Partnerships with Yahoo and AOL existed, but tough negotiations and a race to the lowest bidder make me question if the effort was worth it.

Software-as-a-service

Software is increasingly offered in a SaaS (software as a service) model. This means you don’t purchase the software as a product and install it on your private PC or company server, but you are paying a subscription for the software developers to also host it for you. As an example, Microsoft has pivoted from selling new versions of their Office suite every few years to a yearly “Office 365” subscription (although you can still get a license via one-off payment).

My Business

So, where do I see myself in all this? I for one am tired of working for mediocre German companies, with half-competent colleagues, on banal internal projects. Ideally, I’d avoid working on something that actively addicts people, destroys their social ties, and ruins their life, as so much tech seems to be in the business of. Ideally, it would also address climate change (ironically enough, only refraining using resources and doing business would truly achieve this: computers do not appear out of thin air, they need to be produced).

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Konopka Kodes Blog

Konopka Kodes Blog

25/M software engineer from Düsseldorf, Germany. Developer of Mundraub Navigator (Android app) and Jangine (chess engine).