Is Everything Becoming A Service?

from the products-into-services... dept

For a long time now I’ve been a big believer that there are no digital goods. If you want to sell a digital good, you actually need to sell a service (basically, the ability to provide the good in the future), or you’re going to get forced to give it away for free. It’s not hard to work into the basic economics of how that works. However, Paul Saffo is taking that idea and going even further with it, suggesting that all phsyical goods will be sold as services as well. He points out that it’s already starting to happen with mobile phones: without a service contract they’re just paperweights. However, he can’t believe service providers haven’t figured out that they should be giving out the phones for free to encourage more service usage. He says other physical goods will follow the same pattern. He even predicts that you may get your car for free, but you’ll have to pay for the service to make it run – such as alerting you that it’s time for an oil change, and telling you that the nearest garage is ready and waiting for you.


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Comments on “Is Everything Becoming A Service?”

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10 Comments
thecaptain says:

of course..

everything ESPECIALLY hardware is a service now (or soon will be) and that’s how companies want it.

Think you own your hardware? Maybe legally you do today…but there’s a strong push to make sure that you don’t tomorrow.

The cellphone is the best example but there are others:

– Physically hacking the XBox,PS2,Nintendo so you can play imported games (yes, and copied games)
– DVD players that won’t let you watch DVDs from another region
– Printer companies that sue so you can only buy ink from them
– Car companies that copyright their computer signals so only their dealers can diagnose the car.
– the “formerly know as Palladium” initiative..

Its all a money grab…there’s NO other explanation for it. Greed.

JD says:

Money Hungry

However, he can’t believe service providers haven’t figured out that they should be giving out the phones for free to encourage more service usage.

What’s so hard to believe about them wanting to make money any and every way they can until the consumer backlash forces them into giving them away?

Mike (profile) says:

Re: Money Hungry

What’s so hard to believe about them wanting to make money any and every way they can until the consumer backlash forces them into giving them away?

Sorry, didn’t explain this clearly. The idea is that by giving away the hardware the number of people you sign up for the service is MUCH, MUCH higher, leading to MUCH, MUCH more money in terms of service revenue.

Adding a hardware price hurdle actually HURTS their ability to make money.

Anonymous Coward says:

No Subject Given

Well, as far as things go, the cell phones basically are free … at least the low end models … which are fairly feature rich … and at least free for the initial sign up. They have figured it out but will still try to skim money on the higher priced phones … sometimes a two year commitment simply won’t cover the cost of an camera/palm/mp3/phone hybrid.

aNonMooseCowherd says:

pricing

Saffo says: Or you have a sports car and you want to change the performance of your car. It used to be they would [modify the engine]. Now, they just put a different chip in. For $30, you’ll be able to download a Ferrari performance suspension package into your car when you’re driving.

Some computer companies were doing that back in the 1960s. They would sell a computer whose CPU could run at either of two speeds, depending on how much you were willing to pay. So this isn’t a new idea at all.

aNonMooseCowherd says:

cost shifting and competition

Artificially shifting the cost from the manufacturing cost to future service only works where the manufacturer can lock the customer in, for example through trade secrets. If someone else can offer competing service at a lower price, then the customer wins at the expense of the manufacturer.

Anonymous Coward says:

Free Cars? Not today.

Nothing new here. It’s an old idea and been tried, at least in my state. A small business was offering a free new car with the purchase of a ?service contract? on the car. But then the state attorney general threatened prosecution for fraud on the grounds that the car wasn’t free if you have to buy a service contract to get it. When asked why the mobile phone industry was allowed to do essentially the same thing, the reply was that it was ?accepted industry practice?. Law enforcement apparently defines acceptable practice based on who is doing it and not what it is. So that’s basically the reason you haven’t seen more hardware become a service. It will only happen when the mega corps want it to and until then you can go to prison for it.

The article also mentions American Airlines’ SABRE system. Remember Braniff airlines? They were at one time AA’s biggest competitor. But then AA began to manipulate SABRE to put Braniff at disadvantage, according to Braniff and travel agents. Braniff eventually went out of business. Yet the story only characterizes SABRE as technology that ?always created more new players? without mentioning this other aspect.

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