Customers, Users and Losers

or...Who is the Product?

It is a common beginner mistake to consider customers and users to be the same. A little reflection soon reveals that not only are they different, their interests may not even be aligned! Let's see some examples.

Example	Vendor	Product	Customer	User	Customer-User Interest Alignment
Dining at a restaurant	Restaurant	Dining experience	The host	All diners	Good
Drawing class	Independent art teacher	Drawing lessons	Parent	Child	Good
Commercial Software License	ISV	Some software	Evaluator, Decision Maker, Procurement Person	Actual users	Fair
AWS	Amazon	IaaS	Cloud buyer	Developers	Good
Gmail	Google	Email	Advertiser	We	Poor
Facebook	Facebook	Social network	Advertiser	We	Poor
Twitter	Twitter	Microblogging network	Advertiser	We	Poor

But that doesn’t make sense. Why would Google, Facebook and Twitter create products that generate a conflict of interest between customer and user? They don’t. We’ve got the wrong picture. The product isn’t what we think it is. Here is the real deal: 
 

Example		Vendor		Product		Customer	User			Customer-User Interest Alignment
Gmail	Google		We		Advertiser			Ad platform users	Good
Facebook	Facebook		We		Advertiser			Ad platform users	Good
Twitter	Twitter		We		Advertiser			Ad platform users	Good

We are the product that is probed, segmented, analyzed and sold to the highest bidder. What we experience as the product (email, social network etc) is merely the farm meant to rear the real product – us. This is the sad inescapable reality of any business that chooses advertising instead of subscriptions as its revenue model.

Measurements and targets: The use and abuse of metrics

Software development is a social activity. As such, it does not lend itself very well to measurements. Sure, we can measure a whole lot of things about software development but we can never contend that a given set of metrics is exhaustive.  Plus, it is costly to regularly measure and track too many things. So, we restrict ourselves to a subset of feasible measurements.

For instance, although return on investment is a useful metric, it is often not feasible to measure and track it for a piece of software. Thus, in practice, we settle for things that only paint part of the picture. It is important to acknowledge this. Often, enterprise IT loses sight of this truth. It deludes itself that the reported metrics constitute the big picture (From the school of “If you can’t measure it, it doesn’t exist.”).

What is worse, in the name of continuous improvement, these metrics are converted into targets. Teams now have an incentive to work towards local optima. No wonder large swathes of big enterprise IT are in a desperate mess. New causes of failure are discovered all the time. Heads roll and the new heads track a slightly different subset of metrics.

Automatically converting metrics to targets also has adverse psychological effects. Here is an example from day trading. What is more important? Making more winning trades than losing trades or making money? Obviously it is the second. But the moment you start tracking win-loss ratio it may become a target it itself. Emotional conditioning will also come into play and we will try to have less losing trades.

A software team can get severely constrained when a velocity target is imposed on it. At a certain threshold of constraints, team members lose a sense of empowerment. They play it completely safe and lose initiative. We experience this phenomenon sometimes when we deal with call centres. Government sponsored healthcare and education in western economies often exhibits similar characteristics. It is not just bureaucracy. In an effort to scale and centrally control efficient delivery of services, a raft of metrics is imposed on the practitioners. Performance of schools/hospitals is then tracked against these metrics (they now become targets). Teachers and doctors get frustrated, lose initiative and just play by the book much to the exasperation of parents and patients.

This effect is also known as Goodhart's law, after Professor Charles Goodhart who was Chief Adviser to the Bank of England. Restated more succinctly and more generally:

When a measure becomes a target, it ceases to be a good measure.

Measurements should not automatically become targets. When measurements indicate something is wrong, it calls for a conversation in context, not for a rating downgrade. Conversations in context may reveal that things are still ok in the larger scheme of things, the measurements only point to a local sub-optima.

Trouble is, it is easy to scale management by numbers. It is very difficult to scale management by context. Perhaps it is worth asking if scaling is more important than delivering a quality experience. Besides, too much scale creates “too big to fail” monsters that have to bailed out with the money of the innocent in times of crisis. This is not just true of macroeconomics. It is true of macro IT as well.

Tools aren't value neutral

It is accepted that language influences the way we think1. Language is one of the earliest technologies of communication. We don't have to make a big leap to see that all tools and technologies influence the way we think and act2.

 Therefore, it is erroneous to say things like the following:

“The internet isn’t a pro or anti-democratic technology. It is value neutral”
or
“Powerpoint isn’t good or bad. It is how you use it.”

McLuhan understood this very well. He famously said:

“We shape our tools, and thereafter our tools shape us...Our conventional response to all media, namely that it is how they are used that counts, is the numb stance of the technological idiot.”

Why am I writing this in the middle of posts on software excellence? Because I need this for my forthcoming posts :)

1. Language influences the way we think
http://www.edge.org/3rd_culture/boroditsky09/boroditsky09_index.html
http://www.amazon.com/Language-Thought-Action-S-I-Hayakawa/dp/0156482401

2. Tools (and technologies) influence the way we act
http://www.amazon.com/Understanding-Media-Extensions-Marshall-McLuhan/dp/0262631598
http://www.amazon.com/Shallows-What-Internet-Doing-Brains/dp/0393072223

The Tragedy of Commons based Peer Production

In my previous post, I mentioned how authors of small but useful open source projects often struggle for compensation. Using a FOSS/commercial license is one option but it could go either way. They wouldn't really have to resort to compulsory payment if donations were forthcoming from users/organizations who commercially benefit from it. Therein lies the tragedy of 'Commons based Peer Production'. Only a tiny minority donate. This is detrimental to the growth of all forms of free digitial distribution (indy music, books, software etc). It also makes for an unhealthy society. Big leap? Bear with me.

The bulk of financial transactions in G20 economies happen between:

1. Corporations (B2B)
2. Corporation and citizen (retail - citizens pays corporation, wages - corporation pays citizen)
3. Corporation and state (taxes - corporation pays state, state funded projects - state pays corporation)
4. Citizen and state (taxes - citizen pays state, pension/welfare - state pays citizen)

But what about transactions between citizens? When this goes towards zero, we get a unhealthy society. Centralized services, mostly helpless consumers (citizens). Donating money to the creators of 'digital stuff' that we enjoy is a great way of changing the status quo. The internet has provided a great platform for disintermediation but it will only work if we choose to participate in the process.

We could also try to build momentum within our organizations towards this. Companies that commercially benefit (however indirectly) from free software could set aside some money annually for donations. The beneficiaries could be decided by a poll within the company. After all, this is also part of CSR. Plus it will make for good PR copy.

Open Source authors' struggle for compensation

I guess we all know the difference between free as in speech (freedom) and free as in lunch (gratis). All open source software confer certain freedoms of use, modification and redistribution. None of them are required to be made available to users at zero cost. Yet, I don't know of a single significant project that is open source and fully paid, i.e. no version available at zero cost. Reasons typically offered are:

1. It is the freemium business model - Give away the basic software and charge for enhanced functionality or support.
2. It is not enforceable - Users will simply build the software from the source code and there is no way you can get them to pay.

#1 is okay for projects run by companies. It is often not feasible for projects run by individuals. This a big category of small useful pieces of software (think libaries, plugins, utilities). These people try (in vain?) to make some money via advertisements or by appealing for donations. It is a sad reality that they get no compensation from commercial software/organizations using their work. These people should relook at #2.


I suspect payment is very enforcable against commercial enterprises. Just add a line to your EULA saying "It is illegal to use this software for commercial purposes without paying for it". Most companies would pay a small fee (say $50 for a full version but without support) for a useful piece of software. Either that or their lawyers would blacklist the software. At least you wouldn't have legions of freeloaders just using the software without contributing anything (money, bug reports/fixes, documentation) back. The argument that even freeloaders help spread the word to someone who might eventually buy something is a trifle bleak. Of course, all power to you if are doing this altruistically or if you are happy with the other rewards (fun, learning, reputation).

Giving software away at zero cost means you have to depend on services for income. You either offer your services as an employee (day job) or as support (adding value to what is given away). Either way, it is a model of pricing input instead of output. Scales only with people. Or you have to fall into a category where you can be adopted by a big foundation like Eclipse or Apache or Mozilla.  Good luck with that.

No software patents versus patent reform

We often cry ourselves hoarse trying to justify non-waterfall methods of software development saying that software is fundamentally different from manufacturing or civil construction. There is substance to this. Code is design. Compilation (build) is zero cost for all practical purposes. If we agree that compilation is the equivalent of a manufacturing assembly line or brick-laying, then the economics of software development are very different indeed. The economics of software make it particularly vulnerable to the ill-effects ot the current patent regime.

I used to find it surprising when highly credible people said there was nothing fundamentally different about software patents - "If you're against software patents, you're against patents in general." Until I realized that software patents aren't inherently evil - the devil, as usual, lurks in the details.

Patents exist to balance competing objectives:

1. Encourage innovation
2. Give innovators a chance to profit from their success
3. Improve the body of knowledge in the public domain (eventually)

In practice, the second objective is generally met by conferring a twenty year period of exclusive usage rights. Thus, patents are economic devices. Won't the efficacy of an economic device depend on the underlying economics of the industry it is meant for? Do all industries require twenty years to recoup investment and monetize an innovation? It certainly is ridiculous for software. Technology cycles keep getting shorter - twenty years is several generations in most industries today. A two year patent might be more reasonable for software. Of course, that still leaves jokes like the one-click-checkout patent untouched.

When patents were first conceived, they were meant for flesh and blood patent holders, not for mere legal persons (Corporations). Corporations gained personhood much later. However, the majority of patents today are held by corporations rather than individuals. This has lead to barely legal behaviors that end up stifling innovation in the industry as a whole.

What's really needed is a nimble international body that can tweak the terms of patenting for different industries. But then, international co-operation is hard to come by even for life threatening issues such as climate change. No wonder people push for elimination of software patents instead of push for a better patent regime.