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About Business in Computer Science, Software Engineering.

Business in Computer Science.

Written by Jon Berg <jon.berg|a|turtlemeat.com>

Introduction
A business in the Computer Science area will require as in any other business a product that you will sell for money.

 

Cost and revenue stream
The initial concept of money is that it represent value. Labor has a value. Things have a value. Services performed have a value. You can trace these to the computer science world. Labor is needed to create good software, the software programmer creates value. Good software has a value, in the same way as a tractor has a value to the farmer because it increases the effectiveness to the production on the farm. The word editing software program on the computer increases the effectiveness in an office. Good examples of computer software services are web based email. The software powers a service to a customer, in this case email. The service is paid for by cash or advertising.

To further compare it with old economy principles, you can say that software engineering can be categorized in production or service categories. An example of production is a car manufacturing company that produces cars. An example of a service is a hairdresser shop. Examples of what these categories means in computer science and engineering follows.

 

The Microsoft case
Microsoft's business concept has been to produce some software and ship it out in binary form on cd-roms or diskettes in the old days. This looks very much like what a factory does. Product development (programming the software) is the most expensive task, other tasks like printing the cds and packing is cheap. In traditional production like for cars, the cost of materials and assembly of the product cost money in addition to product development.

You must pay for the program, often for how many machines you want to install it on. This Revenue model have shown to be very successful for doing business in the software business. Just ask any shareholder of Microsoft stock. Bling Bling.

 

Custom applications
One way of generating money in software engineering is to develop a system that someone else's special needs. For every hour spent developing you will get paid a fixed amount of dollar. First custom application development is very expensive for the client. From the clients view the custom application must yield its' investment. Buying a finished product is always cheaper. Do not reinvent the wheel unless it is absolutely necessary.

From the developers perspective custom developed software is often only possible to sell once. You limit the potential revenue. The cost of software is mostly in the development cost. The revenue potential of generic software that have a big market of users is more rational to develop. Custom application development is in the factory category of software business.

 

Computing power and software in the plug
There have been some companies trying to figure out new revenue models for software. One of the fairly new concepts is that your "rent" software, processing power and storage capacity. Somewhat in a similar way you subscribe to cable television. For a monthly fee you can use the software you need. The software, processing and storage is delivered over the network. This could be useful for companies that do not want to invest heavily in IT infrastructure, and do not want the hassles of running servers themselves. Outsourcing and renting software will be categorized as a service type of revenue model.

 

Open Source movement and free software
All software you can download and use free of charge is generally categorized in this section. Even if there may be small differences in licensing. You can not argue that these projects developed free of charge have come up with some impressive results. Examples of such software are Linux, GNU, Apache web server. The open source community and the other free software projects is not business. I would say that this software is more in the category of Research in Computer Science. Some of these projects receive funding from corporations that wish to sponsor them in the same way as regular research project gets funding.

A revenue model for open source and the rest of free software is to charge for support. You get the software for free, but if you need special help you can pay for this. MySql operates with this business model. The amount of work gone into developing MySql is considerable. Support have to be expensive to close the amount of programming hours with support hours. The developers of Mysql do not have exclusive rights to do support, you can start your own MySql-support company without having to participate in the cost of developing it.

 

Computer Science Research versus Commercial Software
The goal of basic research projects is to gain new knowledge. The goal of applied research is a new product. The results of research may be further developed into commercial products. The success in research is defined by successfully coming up with something new. The commercial potential of the product is never considered during the research process. It is one thing to come up with something new (knowledge or product), and something new that actually provides increased value for people, so they will pay money for it. Many research projects end up in demonstrating a new concept, but the product do not have a common value so that it will never be used by the masses. In commercial software success is solely defined by how well the product sells. A successful commercial product will generate revenue for the corporation selling it. Commercial success is hard, and it is often easier to create something new when you can ignore commercial aspects. You can get popular if you ignore the commercial aspect, but you will not earn anything off your work. This is the fact for many free software projects, example Linux, Apache web server etc. which I consider first class research projects.

 

Final remarks
The capitalist system is the greatest motivator in existence. Many people hates Microsoft, but Microsoft is a great example of successfully doing business with computer science or software engineering. A lot of the computer science people are very focused on the engineering part, and naturally the economics and business aspects may not be considered. To quote Gordon Gecko in "Wall Street", "What is worth doing, is worth doing for money.". You do not see many lawyers or doctors working for free, even though they are very interested in law or medicine. The same should apply for computer scientists when they contribute with something that have common value.




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