Sunday Aug 30, 2009

Free, the right price for software

Economic systems are about how to use scarce resources and the Price Mechanism is the way in which a optimal resource allocation occurs. Economists use a branch of theory called “Welfare Economics” to analyse and model the efficiency of the productive economy, and a theoretically maximally efficient set of states can be defined within a model, known as the Pareto-efficiency frontier. A perfectly competitive market meets the efficiency requirements, imperfect or distorted markets do not. Distortions can be caused by the existence of monopolistic markets, taxation, externalities or missing markets.

Traditional Welfare economics rarely considers how copyright and patent law create barriers to entry to markets and thus husband the growth of monopolistic markets, where supply is restricted and prices driven up. It needs to be born in mind that overpricing products such as software which are inputs to the economic process as well as output, means that some otherwise efficient goods will not be produced; they cost too much.

It should also be born in mind that the majority of the world's software is not licensed or charged for, although much of this free to use software is not traded at all, remaining the proprietary goods of their owners who use them to produce other goods and/or services. Benkler in his book, “the Wealth of Networks”, suggests there are nine business models for pursuing value in software, of which only three of them involve trading rights i.e. charging for software. If there was no software copyright i.e. copying was legal and free the only price, software would still be written. The overpricing of software distorts both today's market and the innovation creating tomorrow's. The price mechanism should ensure that resources that are scarce and consumed should be payed for. Software is not scarce, although the people that write it and the machines that run it are. Resources such as software should be free.

This was meant to be an essay based on some slides I have been trailing inside the company, but I discovered how hard it is and how much time it takes to actually put ideas into essay form while preparing the paper behind what became Monopoly & Prices, see below. So this is more of an abstract, I shall upload the essay when finished to my personal site downloads page.

Thanks once again to Beggs, Fischer and Dornbusch, whose Economics 8th Edition reminded me of my Welfare Economics.

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Wednesday Aug 26, 2009

Monopoly and prices

Monopolies restrict supply and offer their goods at prices above equilibrium price, the opportunity cost of the resources used to make the goods. I am writing a short paper about this since it is a piece of thinking I revisited while developing my thoughts on free software, but is not central to those thoughts. There remain those who still think that monopolistic domination of markets is a legitimate business goal and that public policy and regulation should not inhibit this "free" market tendency. A review of the theory of the firm shows that monopolies restrict supply, raise prices and make super-profits.

Firms seek to maximise profit. As prices fall, demand increases. As output increases, average costs fall and then may rise due to economies of scale and then diminishing returns. In a "perfect" market, all firms are price takers. Business failure means that expensive suppliers leave the market, and super-profits caused by the difference in a given price and superior cost structures of the survivors encourage new entrants to bid down the price. In a perfect market, there are no super-profits and prices are equal to average costs. In a monopolistic or imperfect market, defined as where a firm's output decisions affect price, a firm's maximum profit occurs where its marginal cost is equal to its marginal revenue. No matter if dis-economies of scale are trivial or important, this will always be a lower output and a higher price than the opportunity cost price/output position.

I am writing a longer essay about this, which I hope to post on this blog, but I shall mirror it on my personal site downloads page. I doubt that there's anything original in the essay, but having it one place is useful to me and it'll help me write my essay/presentation that I promised Dominc Kay on "Why free is the right price for software?".

Thursday Jul 30, 2009

Good British Universities

Why is the LSE not one of the top Universities in the world according to the Academic Ranking of World Universities? I scattered some thoughts on the UK Higher Education system in an article on my blog the other month and promised to look and see what Shanghai Jiao Tong University's methodology thought of, what I thought to be three highly competitive British Universities, i.e. LSE, Sussex and Warwick, which had failed to make the top 100 of their 2007 ranking. I have come to the conclusion that what seems to me an anomaly, illustrating either a flaw in the methodology, or a misuse by me as the ranking's design goal does not meet my needs. However the same criticisms I have discovered are also mentioned on Wikipedia in their article on ARWU as part of a discussion on University Ranking. On further study, I feel the breadth of the index is incredibly narrow. I also question the appropriateness of the individual scores for the purposes they claim. The use of the survey by the Economist and EU Commission and its eco-system really needs to be questioned. I have some more detailed comments about the index and the Guardian's scores if you Read More.

[Read More]

Thursday Jul 02, 2009

You'd think I know where I am when at home

Been mucking around with the ipodtouch having rescued it from the family for the last week. I have been subject to the "can't find your location" feature while at home. Google points me at Skyhook Wireless' site at GetSatisfaction and I discover that like Plazes, it uses a database solution, in this case run by Skyhook, who explain how it works on their site. This means that you need to be connected to the net to discover your location, but since that's true of the map application, its not too onerous a constraint.

For a 'touch, I need to find out my router's MAC address, which is harder than I'd like; it doesn't seem to display in the control panel. I was pointed at NetStumbler, but it has to run on an operating system it supports with wireless. NB this seems to exclude Vista 64 and obviously in retrospect my desktops, so on my third install I finally discover the address and use it to update SkyHook's database. I need my Longtitude and Latitude for this, which I have never bothered to record, so I used http://www.streetmap.co.uk to get this because its easy.

I had to wait ten days, but its working now.

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Tuesday Jun 30, 2009

Does knowing Stuff help?

How important are Universities to the software industry productivity. One would hope fairly high. For various reasons, I have been considering this question and some collaborators pointed me at the Academic Ranking of World Universitiesis which is referenced at Wikipedia as well and I first referred to in this blog last November. This is produced by Shanghai Jiao Tong University, in China.

I know that a discussion on ranking methodology may not be very helpful when considering economic growth issues, but there are some quite interesting and surprising results. One of the things that pointed me there is the domination of the USA, which has over 50% of the top 100 places as it was quoted for this reason.

Best Universities by Region

Sadly I haven't kept in touch with this issue since I was asked to work on other things since Xmas. I am sure that basic research drives innovation and productivity; I think that research quality and output is part of an institution's organic capability and therefore its undergraduate body and its ability to attract top students is important. I have come to the conclusion that Joy's law

"Clever People work elsewhere"

applies to academia as well, and that a lot of innovation in, and production of, software happens, outside the research institutes and departments, and also outside the traditional software industry. This is one of the reasons why public policy makers need to look at their procurement policies as well as their subsidy policies.

The rest of this article looks at the 2007 results, specifically at the UK University positions and compares them with some data points from the Guardian's Guide to Universities 2007, together with some personal prejudice, some of it informed. BTW, I can't find reference to the 2007 Guide on the web, so you might like to use this link Guardian University Guide 2006, and the 2008 results are also available. If you're planning to apply to a UK University presumably for a 2010 entry, I'd recommend getting a copy of the next book, which should be published later in the year.

Shanghai Jiao Tong University have documented their methodology on their site, or at the Wikipedia page. It is based on Nobel prize winners and the publication record of alumni and staff. One thing from observation is that Universities with large medical faculties seem to do well. It seems to have been designed with a scientific bias and for the purpose of public policy planning. From my current research, I am not able to determine the role of ICT or Software Engineering in these results. It seems that this may be a piece of research yet to be done. i.e. the creation of a ranking table for ICT teaching.

The 2007 national results are published http://www.arwu.org/rank/2007/ARWU2007Statistics.htm.

I was surprised by the fact that the UK comes a good second to the USA. The UK has 11, which are

  • Cambridge, Oxford, Imperial, UCL, Manchester, Edinburgh, Bristol, Sheffield, Nottingham, Kings College London and Birmingham

Another view of UK University ranking comes from "Blackadder goes forth".


Blackadder:I then leapt on the opportunity to test you. I asked if he'd been to one of the great universities: Oxford, Cambridge, or Hull.
Nurse Fletcher-Brown:Well?
Blackadder:You failed to spot that only two of those are great universities!
Nurse Fletcher-Brown:You swine!
Melchett: That's right! Oxford's a complete dump! [elsewhere]

Looking at the Guardian University Guide 2007's Computer Sciences and IT page, gives a quite different view. One of the most important things to say is that the Guardian's ranking methodology is optimised for undergraduate choice and the relationship between undergraduate choice and the wealth creation activities of a university are not well understood, or at least not by me. The Guardian's score is based on assessing the staff's qualifications, what it takes to get in, spend, pupil/teacher ratios, a value add score, post graduate job prospects and inclusiveness. The methodology is discussed in the book, and in the newspaper. Their 2009 Methodology notes are on the Guardian web site. The 2007 Computer & IT top ten were,

  • Imperial, St. Andrews, Cambridge, Edinburgh, Oxford, York, Surrey, Durham, Bristol, & Glasgow.

with Nottingham 11th. It interests me that the Guardian, doesn't (didn't) take the research grade of the departments into account, or maybe it does within the calculation of the teaching quality index. Its not easy to produce a Guardian fact based 'Best University' since the book is aimed at helping Undergraduates discover the best courses for themselves and the analysis is both institution and subject driven.

Personally I am surprised at how low KCL scores in the World Rankings compared with the other UK universities. It's also curious to me that the LSE, Warwick and Sussex are missing. (I may look into the numbers and see where they are and try and see why these are as they are it is likely to be methodology based, and tell us something about the methodology.) I am most curious as to where the LSE sits, which from its high numbers of overseas students, and its ability to ask for very high entry grades seems to be internationally and domestically very popular. I suppose that it might be a reflection of the science focus of the methodology, or the biases of potential students in the UK.

Since the question I am looking at is how do or can Universities add to the value of the software industry, I wonder if under-graduate students are the raw material of universities. It seems reasonable to assume that good researchers and teachers want to work at renowned (& rich) Universities, and that a University's social agenda is harder to sustain in the UK than in the primary or secondary sector. My theory is that as students and their families take more financial responsibility for their education, an assessment of life-time earnings comes into the decision framework and traditional economic criteria such as returns on investment and payback horizons are consider in more or less formal terms.

In my regional chart above, Europe includes Russia & Israel, and the obvious non EU countries (Norway & Switzerland), otherwise they're EU member states, with the UK contributing 11.

Both Canada and Sweden are punching above their weight in terms of population and even GNP, although Sweden is the host nation for the Nobel panel, which may have some relevance.

The Wikipedia page, Academic Ranking of World Universities has a sort button so you can see the institutions in order of excellence, and now has the 2008 figures, and there are other ranking methodologies and publishers.

This was been written over a number of months, and the UK fact finding over a number of years as I helped and hindered my family choose their university courses. The article was originally planned to be about the value of research to industry, but has evolved into some thoughts about the UK higher education system. I hope its useful to someone.

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Monday May 11, 2009

Are liberal licenses a better future proofing?

A couple of days after the Kable Open Source conference, I looked up Gianugo Rabellino's blog and read his then most recent blog article, "Of Oracle, Sun and Open Development" about the impact of M&A on open source investment protection.

The conclusion I draw from his article is that open source adopters need to make investment protection a selection criteria. Its well understood that the vibrancy of the product community is crucial, so its just obvious that taking a view on the future is as important. Gianugo also argues that liberal licences enhance the ability of a community to survive M&A activity. I think he's probably right, and this means that licence terms might become important even to end user sites who have no intention of distributing software. It may also be worth measuring how diverse an open source development community is before adopting the software.

Its an interesting spin on Alisdair Mangham's comment on licences, (see below) but they didn't debate. Alisdair's comment was that if you don't plan to distribute, you don't need to worry about viral licences, he might well agree on the need to evaluate to protect the development cost.

This is another article that's been hanging around on my machine for longer than is smart. This one I have not back dated.

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Wednesday Apr 22, 2009

You don't manufacture software

Gianugo Rabellino of Source Sense and the Apache Foundation and presented a demolition of the need or inexorability of charging for right to use, he finished this demoltion by quoting Eric Raymond from his paper, "The Magic Cauldron"

"....software is largely a service industry operating under the persistent but unfounded delusion that it is a manufacturing industry. "

Spot on in my opinion, creative workers need to get used to selling time and earning wages again.

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Tuesday Apr 21, 2009

The Third Wave of Adoption

I spoke next, the slides I used, based on Simon Phipps, current pitch are posted on my page at Sun's mediacaster. (I say based, this is a derived work, and I was pleased to be able to use his presentation). I covered how we have got to where we are, the Pioneers, the four freedoms, the geek community and the arrival of the enterprise. We then look at the compelling value of peer production, and the role of licenses in the community, and how to defend against trolls and vultures. One slide, developed by Simon and articulated in Sun's Free and Open Source Licensing White Paper posted at www.sun.com, classes the open source licences into Open, file based and project based licences. The slide I used is posted below

Three Classes of License Slide

. It is clear there are some who think that only the GPL counts as Open Source, but despite its undoubted popularity, there are a number of people and organisations who think that its duty to publish is not always desirable, and the Apache licence. These are not restricted to organisations that pursue a rights based business model. The presentations and white paper talk about community roles and present a model of these roles. The presentation re-inforces the fact that Sun is the largest publisher of Open Source in the world and has a range of produicts and partners to allow open source adopters to what they want.

The slide above is available as a full size .jpg if you prefer it.

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Implementing Opensource

Alisdair Mangham, the head of IS & Development for the LB of Camden argued from experience, as he presented a case study, that you need to own software development expertise to adopt open source and this became a theme for the rest of the day. Alisdair argied for an adoption led deployment, I was interested how yet again, he as do many others argue that Finance is a mission critical function. Its not always true, and becoming less so. Businesses compete on price or by differentiation. Its very hard, or illegal to innovate your finance processes, and price advantage is gained by efficient processes not innovative finance. Today, it should be at the front of the queue for outsourcing. Another GEM from Alisdair is that licence terms are not important to an End-User site and he knows, he's read a few. The point he makes is that unless you are looking to do business as a software house, the liabilities you incur through licence is not important. I wonder if he's considered aquiring indemnity.

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The importance of Open Source

John Pugh MP opened the conference, with a review of the state of software procurement in the UK public sector. He suggested that ubiquity should be the trigger point at which charging for right to use becomes undesirable. I see no justification in this, although the behaviour of the drugs companies and their monopsony buyers is an interesting example of what might happen. I think his own references to Kant, and testing it as a natural law shows that its can't be done. When does something become so ubiquitous that it should be free to use. He also looked at a new tripartite demand for software, the civil servant, the consultant and the provider and wondered how open source providers and their ecosystem could get to the table. He also pointed out the lack of domain expertise often held by the civil servants, which is what causes the need for consultants. It reminds me of projects I have been on when assessing bid/no-bid decisions as to whether we had the expertise to manage the project's profitability. The project managers are easy to find, its people who understand what's going on that are harder.

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Thursday Apr 02, 2009

News

I have been busy writting a presentation on 'Why Software should be free?', it looks like it'll need an essay/paper as well. The economic theory doesn't lend it self well to a presentation. So that'll be fun.

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Sunday Feb 22, 2009

For more about Privacy in Europe

So what was I looking for? I found and was pointed to by a lazyweb search at,

and now I have these three links collected in a single HTML page with a permalink, i.e here. The delicious links are tagged EU, but I might add a gov tag to the tag base as this seems sensible for this case.

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Tuesday Feb 17, 2009

How to set up a USB Flash Drive from Windows to Windows in Virtual Box

Read the User Manual, available on http://www.virtualbox.org/wiki/Downloads and think "all that stuff you need to know that's a bit poor". Then,

  1. Make sure the windows guest is dormant
  2. Plug the Flash Drive into the Computer
  3. Edit the VM Settings
    1. Enable USB
    2. Enable USB 2.0
    3. Create a Filter
      • move the mouse over the add filter button and the USB devices will appear in the display box. This box is active. Select the one you want. If this is not obvious, then you can test this by removing the USB In the example above I have also taken Sasquatch's advice and created an empty filter which will assign all USB devices to the guest operating system. This is however disabled.
  4. Start the VM and wait for Windows to do its plug and play magic.
Virtual Box USB Settings Editor

This process was developed using a Windows Vista 32 bit guest and a Windows Vista 64 bit host, and a patched version of Virtual Vox 2.1.3

I have left the "All Devices" filter disabled. It will do all devices and thus some system devices will become visible to the guest such as the fingerprint reader, and whatever Chicony Electronics provide.

Sasquatch is a regular correspondent at virtual box forums and offered his advice in a thread called "USB on Windows host and Windows guest".

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Thursday Jan 08, 2009

Consumerism & Sedimentation in the IT industry

Is there an opportunity as we build the Future Internet for a convergence around the general purpose, and the development of software appliances which can differentiate their functionality. i.e. one hardware box which assumes a role depending upon the software it loads. What's happened with cars? I suppose the consumer dimension of cars (and home PCs) continues to permit non (welfare) optimal differentiation, so the economic history of car production is not necessarily a good predictor of the future of IT. People buy cars and even desktop/laptops because they're pretty or have status value. I have never heard of data centre manager influenced by these criteria for the contents of a data centre. However, cars are built from common components and the world class manufacturers' cars are beginning to look very similar

Will IT stay|move into the factory, so consumerisation becomes irrelevant? There is/will always be the developer/deployment platform feedback loop, but Mac has no server platform. The developers want Mac OS, but where do they deploy. Much of Apple's developer strategy is about using their eco-system as both attractive to developers, partly on their merits, but also because they have users. An example is that the iphone is developing a consumer/service user community which looks to mac.com for its software services; they're locked in.

T-Mobile, the mobile phone subsidiary of Deutsche Telkom launched a Google phone in Sept. Who are they're looking to escape from? Actually who makes it for them? Or is this merely a consumer play, trying to compete with the iphone and get the consumer conversation back. iphone users love Apple, T-Mobile G1 customers at least know who their Telco is, and Google might be one of the few brands capable of taking Apple on today.

This article was inspired by the R&D in Europe round table at ICT 2008 last November and blogged by me under the title Can Europe keep up?, which was posted today, but backdated to 25th November. Its been written from notes taken at the time and worked on sporadically since then. Since it is not immutably tied to the events of the time, but reflects ideas provoked by the event, I have posted it as at today's date.

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Tuesday Nov 25, 2008

Can Europe keep up?

I then attended a panel discussion on R&D in Europe, which given the attendees was pretty self congratulatory. HP's VP for Labs is a Brit, and was on the panel. The reason I mention this is that he was the only employee of a global IT company i.e. one not quoted in Europe, who spoke in a plenary session. They sort of said "Great Research, no IT manufacturing" , but why? We do have ICT manufacturers in Telco, including Alcatel, Ericsson, Nokia and Seimens.

Can the European NEP's maintain their leadership? What does Europe's computing hardware poverty mean? Can it compensate with a single market, a vibrant software industry and a well educated work force?

It was also shown that not all these advantages are enough. SAP does very little development in Europe these days, and it was said that innovation rate in Europe is too low, despite a world leading position in many areas.

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