Choice Trumps Price on the Internet

NYTimes writes:

“When I first started doing work on how the Internet is affecting commerce, like a lot of people, I was really excited by this nearly perfect market,” said Erik Brynjolfsson of the Sloan School of Management at Massachusetts Institute of Technology.

His early research found that prices on the Internet were 6 percent to 16 percent lower than prices off-line.

But when he thought about how people actually shop online, and what they find valuable, he realized that low prices are not the big story. Selection is. The Internet offers variety that is simply impossible in traditional stores.

Online shoppers are not just buying the same stuff for less money. They are buying different stuff. And they are much more likely to be getting exactly what they want than are off-line shoppers.

In effect, the emergence of online retailers places a specialty store and a personalized shopping assistant at every shopper’s desk,” write Professor Brynjolfsson, Yu Hu, and Michael D. Smith in a November 2003 article in Management Science. “This improves the welfare of these consumers by allowing them to locate and buy specialty products they otherwise would not have purchased due to high transaction costs or low product awareness.”

A copy of the paper is available here.

Tech Trends

An essay by Joi Ito:

Several crucial shifts in technology are emerging that will drastically affect the relationship between users and technology in the near future. Wireless Internet is becoming ubiquitous and economically viable. Internet capable devices are becoming smaller and more powerful.

Alongside technological shifts, new social trends are emerging. Users are shifting their attention from packaged content to social information about location, presence and community. Tools for identity, trust, relationship management and navigating social networks are becoming more popular. Mobile communication tools are shifting away from a 1-1 model, allowing for increased many-to-many interactions; such a shift is even being used to permit new forms of democracy and citizen participation in global dialog.

While new technological and social trends are occurring, it is not without resistance, often by the developers and distributors of technology and content. In order to empower the consumer as a community member and producer, communication carriers, hardware manufacturers and content providers must understand and build models that focus less on the content and more on the relationships.

It is clear that the simplicity of WiFi and the Internet is more efficient than the networks planned by the telephone companies. That said, the availability of low cost phones is controlled by mobile telephone carriers, their distribution networks and their subsidies.

Broadband in the home will always be cheaper than mobile broadband. Therefore it will be cheaper for people to download content at home and use storage devices to carry it with them rather than downloading or viewing content over a mobile phone network. Most entertainment content is not so time sensitive that it requires real time network access.

It is clear that mobile computing is about communication. Not only are mobile phones being used for 1-1 communications, as expected through voice conversations; people are learning new forms of communication because of SMS, email and presence technologies. Often, the value of these communication processes is the transmission of state or context information; the content of the messages are less important.

Media and Entertainment in 2010

[via Jeff Jarvis] An IBM report looks at the future:

An increasing segment of consumers will be able to compile, program, edit, create and share content; as a result, they will gain more control and become more immersed in media experiences.

The future will see more open, reciprocal relationships and more ways to interact and customize at every point of the media value loop among brands, creators, suppliers, distributors, delivery systems, customers and experiencers of media content.

Consumers will be able to compile, edit, produce, create and broadcast complex content and manipulate huge files from the comfort of their homes and personal budgets. The battle for human attention will remain pitched: innovations will continue to cascade rapidly to market. The glut of choices, channels, brands, traditional media and archival content must now compete with customers and consumers new enthusiasms for interactive media, on demand scheduling and publishing, and steadily increasing thirst for the rich, interactive experiences digital technologies make possible.

Media companies must interact with the hot new combinations of technology, devices and behaviors that will be unpredictably driven by open markets and a determined sense of user entitlement.

Merrill Lynch On Demand Index

Jeffrey Nolan has a link to ML’s launch of its On Demand index:

On Demand is more than just a software notion as the broader technology concept is about bringing much needed flexibility, agility, and execution capabilities to a business. This is not an investable or tradable index. MLODI is designed to help investors better track, measure, and understand the transformation of the software industry to the On Demand model. Very simply put, On Demand practices will change the way customers buy, vendors sell, and investors invest.

MLODI breaks the software market down into sub-segments for applications, infrastructure, and management. We look at how software is licensed and how it is deployed to determine our final MLODI score. Index scores range from 0 to 100, with 100 indicating a model that is 100% On Demand.

The overall software rating for the index at the end of 2003 was 20.0 or 13.1 excluding Microsoft and IBM. Enterprise Application Software had a 2003 calendar year rating of 14.5, with the bulk of the On Demand revenue coming from Microsoft.

On Demand is all about flexibility. The price/performance of technology components has improved so much that it is cost effective to build highly scalable computing platforms. The software that runs on these platforms is unique in that it can be comprised of a highly flexible set of components. This promises that business analysts and consultants can now represent their business processes in the software itself to a degree previously unheard of. The whole system can now be componentized to a level that allows one to scale up or down capacity, depending on the business needs at that moment in time. The signature features of On Demand software solutions are 1) term licensing and 2) hosted offerings – though it is possible to be considered an On Demand software solution having only one without the other.

Differentiation and Segmentation

Seth Godin explains the difference:

Differentiation means thinking very hard about the market and your competitors and somehow making yourself different. Any rational person spending a fair amount of time with perfect information will have no trouble figuring out why you’re different.

Segmentation is a variation of that, but it involves breaking the audience into pieces you invent, and then differentiating yourself for that segment.

Both are selfish.

Both assume that people care about you.

Both don’t work the way they used to.

Used to be that you could buy enough ads and interrupt enough people to make this strategy work. No longer. The filters are too strong. People are too resistant.

You don’t create a purple cow by being different. You do it by creating something worth talking about!

SOA Explained

MDSN has a tutorial on service-oriented architectures (SOA):

It’s would be easy to conclude that the move to Service Orientation really commenced with Web servicesabout three years ago. However, Web services were merely a step along a much longer road. The notion of a service is an integral part of component thinking, and it is clear that distributed architectures were early attempts to implement service-oriented architecture. What’s important to recognize is that Web services are part of the wider picture that is SOA. The Web service is the programmatic interface to a capability that is in conformance with WSnn protocols. So Web services provide us with certain architectural characteristics and benefitsspecifically platform independence, loose coupling, self description, and discoveryand they can enable a formal separation between the provider and consumer because of the formality of the interface.

Service is the important concept. Web Services are the set of protocols by which Services can be published, discovered and used in a technology neutral, standard form.

In fact Web services are not a mandatory component of a SOA, although increasingly they will become so. SOA is potentially much wider in its scope than simply defining service implementation, addressing the quality of the service from the perspective of the provider and the consumer. You can draw a parallel with CBD and component technologies. COM and UML component packaging address components from the technology perspective, but CBD, or indeed Component-Based Software Engineering (CBSE), is the discipline by which you ensure you are building components that are aligned with the business. In the same way, Web services are purely the implementation. SOA is the approach, not just the service equivalent of a UML component packaging diagram.

SOA is not just an architecture of services seen from a technology perspective, but the policies, practices, and frameworks by which we ensure the right services are provided and consumed.

TECH TALK: Letter to Arun Shourie (Part 3)

3. Remove Anti-dumping duty on import of old PCs

There is a $200 anti-dumping duty on the import of old computers into India. Why? To protect a non-existent domestic manufacturing industry? India needs cheaper computers. If Intel and Microsoft, who between them control the processor and operating system for the computers, will not bring down their price points for the Indian market, we can at least ensure competition for them. Non-consumption and piracy are not solutions. While open-source software provides a possible alternative to Microsoft’s Windows and Office, the cost of hardware still remains an issue.

My suggestion: get rid of the $200 anti-dumping duty on the import of used computers. While a recent notification does exempt some categories, it needs to be extended to all imports of old computers. Or if the government does not want to lose revenue, levy the same duty on them as exists on other computer imports (25% or so). Of course, the ideal scenario would be to eliminate duties altogether on computers, but that’s a bigger decision.

What will this do for India? The world (primarily US, Europe and Japan) are disposing off tens of millions of computers every year. These PCs are hard to dispose off and have become an environment hazard for many countries. For the cost of just shipping (which will come to about $60-70 about Rs 3,200 – per computer if done in bulk), we can get these computers in India. Add Rs 800 as customs charges (rather than Rs 9,000 as it is now), and we have a computer for Rs 4,000. Even if only 4 in 5 work, the cost still does not exceed Rs 5,000. This is the 5KPC.

The key is to use this not as a standalone desktop but as a network device a thin client. This can be the foundation for deploying millions of computers for today’s non-consumers those users who cannot afford one because the current price of Rs 15-20,000 for a PC is way too expensive for them. Intel and others should back this move because it will spur sales of servers (thin clients needs thick servers). More importantly, it spurs a domestic industry where none exists by opening up new markets for technology.

4. Standardise Indian language computing efforts

There are too many overlapping and parallel projects going on across the country to get Indian language support in the computer operating systems. It would be nice if there can be a standardisation of these efforts. There are many elements which need to come together here: fonts, Unicode support in the character set, translations, keyboard design, application support. If the various efforts can be coordinated together, it will help spur the use of local language computing and content development in these languages. India has plenty of languages to go around for all!

Tomorrow: Letter to Arun Shourie (continued)