An interview with Steve Ballmer – a lot of “Microsoft is cool” gibberish, but one nice quote stands out for me:
Forbes.com: Right now, I can go out and get a free alternative to just about every product Microsoft sells. Why do people keep paying you for something they could get free?
Ballmer: One, people value their time. Our stuff does more, and they like that. Two, people value their time, and those [free] things tend to be clunky. Let’s say you think you can save $50. And then you go and waste three hours. You tell me how quick that payback is. Y
Awesome example, especially from a third-world POV. Let’s try a practical example: Microsoft Office.
Okay, after being tossed around in a haphazard manner by the Microsoft Office website, I’ve determined that the box price of Microsoft Office 2003 Standard Edition is around $400.
Let’s say we have a guy in the US who wants to buy an Office suite. A typical middle-class white-collar guy, who needs it to write stalker-type fan-mail, balance his budget, whatever. This typical middle-class guy (let’s call him Joe) makes about $200 a day. (Okay, that might be on the low-end for US salaries, I don’t really know; but bear with me here, I don’t want have to do any more actual research… ). So he compares the cost of MS Office 2003 Standard Edition, which he uses at work (yes, this unscientific thought experiment considers MS lock-in!), with that of this alternative thingy he heard of, OpenOffice. Why, the difference is a whopping $400! That’s four days work!
Now, Joe reasons: If I go for OpenOffice, I save two days’ salary’s worth in buying price… but I have to download it, familiarize myself with it, convert all my old documents… and I don’t even know if it will do everything I want! MS Office is convenient, and for Joe, it’s just two days’ salary anyway. It might very well be worth it for Joe to just buy MS Office and not have to bother with all this open source business.
Now, say we have another user, this time from the Philippines: Juan is a typical Filipino office worker. He’s earning around P500 a day. (Okay, I’m sure this here is a fairly good number) He looks at the price of MS Office and… why, the price is a whopping $400! That’s P20,000! That translates to about a 1.33 month’s worth of Juan’s salary! Juan finds out there’s a free alternative: OpenOffice. He’s not familiar with it, but Juan is a pretty smart guy, and he figures in a month or so, he can be just as good with OpenOffice as with MS Office. After all, it didn’t take him one month to figure out MS Office right?
This points us to the awesome conclusion: Open source becomes more attractive as people earn less. What an interesting (non-scientific) thought experiment! Even more interesting, if we remove the MS lock-in factor, Joe has even less incentive to buy MS Office… since he has to familiarize himself with whatever software he gets anyway. So, what does this mean for Microsoft? It means, the best way for traditional software companies to conquer developing markets is to increase the per capita income in those countries! Microsoft should make us richer!
Think about that: more than a month of Juan’s hard-earned salary is needed to buy this software! No wonder the software pirates are so rampant in developing countries!