[Discuss] OSHW & Economics

Mario Gómez mxgxw.alpha at gmail.com
Mon Nov 18 17:12:14 UTC 2013


OSHW & economics?

Disclaimer: I'm not an economist and I only have basic notions of
economics, so please correct me if there is any economist on the list.

With Open Source Software is pretty straightforward to create a economy
based on services where the "final product" doesn't have a direct monetary
value but the services associated to it (support, customization,
implementation, etc). This works OK this way because even if the
development cost are high the reproduction of the final result is always
near to zero, this means that with enough time (and people) using a OSS
software the real cost of each individual copy start to decrease to a
minimum for each user.

So you cannot base your businness on selling the software per se but the
services associated to it. For example if developing a OSS software
solution costs $1000, assuming a reproduction cost of 0 and you have 1000
users that means that the real value of the software is $1 by user.

But those 1000 users would need support and if we assume that we sell the
software to our users at $1 but also offer associated services to $5  that
means that a bussiness based on services could have more oportunities to
get profits by offering support solutions and associated services than
selling just the software (see for example RedHat).

But the OSHW always have an associated cost and there is no way that a
small OSHW proyect can compete with an asian manufacturer for example. I
mean, with the right facilities, any manufacturer could take an OSHW design
and reproduce at just a small fraction of the costs that the original
designer had.

And obviously in a world were the predominant way of think is to generate
maximum profits, if for example, I'm offering a custom solution based on a
OSHW platform then obviously I would end choosing the provider with the
lowest price, even if isn't not the original designer, even if that is
against the OSHW philosophy and good practices.

However, this kind of mentality could be a deterrent for someone to work on
OSHW projects, and this is the same problem that originally was behind the
creation of patents that had the objetive of protect the "inventor".

But I'll give you another example of a good side of this: Imagine a third
world country with income levels less than $100 at month. A simple Arduino
could cost a third of that income, but a equivalent product manufactured in
asia (I'm not talking about counterfeits) could cost just $10, that means
that this versión at a lower cost at the end of the day increases the
posibilities for the people on this countries to access this kind of
technology. Making the access to the technology more "democratic".

In Software is just the developer the one that could be "harmed" if they
don't offer support to their own work because once the software is finished
there isn't any external factors that prevent them to offer a solution to
their clients, and even if there are other companies offering the same
support services they all play in the same "field".

But in hardware, how a OSHW company could survive if there is an "external"
factor associated to the cost of manufacture that cannot be reduced for
manufacturing in small quantities?

How the OSHW philosophy conciliates with the simple fact that the "makers"
need something to eat at the end of the day?

For software we already know what's the answer: a service-based economy.
But for software I don't know what could result in the long run.

I would say that companies like SparkFun and Adafruit are really good
examples of how this can work in the real world, not only offering their
products but also the support and the knowledge about how to use them.

However this companies are pretty "new", and they sell physical things
rather than support. But you can find easily on eBay or DX exact copies of
their products with the same functionality at just a fraction of the cost.
If we follow the market rules, then the people is going to start choosing
the lower cost alternatives (because the value of something is how much the
market is willing to pay for it and not their real manufacturing cost)
making more hard for this kind of companies survive in the long run unless
they start to manufacture their products overseas.

I know that this is not a problem with the OSHW philosophy but the current
"global economy" and "global markets". How is possible that something that
is manufactured at the other side of the globe has a lower cost than
something manufactured locally even if the latter doesn't provide any value
to the local comunity?

I would think that the main problem is that current economy model doesn't
take in consideration the added value for the people but only the
"material" costs, including the sad fact that in this model treats people
as just another material, lower wages mean cheaper production costs and
more profits for the business.

I would think that OSHW is not a manufacturing revolution, but more a way
to question ourselfs if the current models really benefit anyone except the
business. I would be willing to pay more for something if I know that it
gives any kind to benefit to the community and the "inventors", but sadly I
would think that is not the way of thinking of most of the world.

Any ideas, suggestions, someone from SparkFun or Adafruit that could share
their experience, any economist?

I'll leave this discussion open for anyone that wants to share his toughts
about this interesting topic.

Regards,
Mario.
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