Because Demand Curves Slope Downwards
by Peter Coffee on August 19, 2009 at 03:11 PM
Whenever someone asks me if Force.com's superior productivity will put in-house developers out of work, I struggle to avoid launching into Economics 101. It seems appropriate, though, to review those fundamentals in response to yesterday's eWEEK story about application development budgets on the rise.
Demand curves slope downwards. That is, when the price of something (on the vertical axis) goes down, the quantity demanded (on the horizontal axis) goes up.
If technology improvement shifts the supply curve outward, so that a larger quantity is available at any given price, we can expect the market to settle at a new intersection point where price has gone down while quantity produced has risen.
But if you really want to see something exciting, don't just shift the supply curve to the right. Flatten it. Introduce a technology change, something like metadata-based customization using clicks rather than code.Make it possible for incrementally more development to be done by someone whose skills are not as scarce, and whose cost is therefore no more, than the person who was previously doing the most advanced development that you could afford to have done at all.
If the supply curve approaches a horizontal line, with additional units of development output available at almost invariant cost, the quantity demanded will shoot off far to the right. The area of the rectangle defined by the product, price x quantity, will be enormously more than it was before: that product, of course, is the total spending on the service or the good that's under discussion.
That's why it's great for developers, as well as for those who pay them, that Force.com makes developers more productive -- and even that it enables much routine development to be done by "power users." What this means is that the incremental hour of work, by someone with any given level of development skill, is now worth more than it used to be. The supply curve is shifted right and flattened out: the total amount of money that's now worth spending on development goes up, and up, and up.
If anybody's unhappy with that picture, please tell me why.
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Comments
Posted by Alok Misra on August 22, 2009 10:21 AM:
Great point Peter and I like the Demand curve analogy. Seems like just a few years ago when the mainframes ruled and I had begun my career coding on Assembler, Fortran and COBOL. Those were the days when one would have to sit and punch a card for each line of code, instruction or data! Every time there was a typo, a new card would have to be punched. Each programmer would spend half of their time every day just creating card decks. Our company had armies of people maintaining computers, printers, disks, tape libraries and databases for our small company that serviced only two local customers, managing less than a gigabyte of data...
... fast forward a couple of decades and the productivity increase isn't that hard to notice. Navatar Group builds and markets Cloud-products on Force.com and is the same size as my employer back then. We service customers worldwide. There are no DBAs, networks admins or servers involved. Architects and programmers are able to leverage work from coders all over the world, and therefore able to pack more value in less time.
Alok Misra
Blog: www.navatarforce.com
Posted by Steven Warshawsky on August 25, 2009 09:34 AM:
Peter looking at the supply and demand curve is an interesting exercise. However, I think there are a couple of points that have not been considered. First, we need to look at the supply and demand curve from a micro economics perspective. Second, within an organization, price equates to salary and therefore is fixed over a period.
I do agree that supply will dramatically increase utilizing the Force.com platform but price (or FTE salary) remains constant. The supply has increased shifting the demand curve to the right as well. I would expect that if there is a dramatic shift in supply with constant price this would equate to IT increased capacity to meet existing demand.
Today, Demand outstrips supply and we are not on the curve in a micro economic sense. Force.com does provide a unique ability to maintain price (salary) and increase supply thus leading to increased ability to meet business demand.