Thursday, February 15, 2007

Certification Tax Protest

Has anyone other than me ever wondered why software integration and administration is so expensive considering that all the components are supposedly "certified" to work together? The conservative estimate of the ratio of administration expense to new license expense is about 6:1 -- it costs you 6 times as much money to integrate and maintain the "certified" parts as it does to buy the parts themselves. Let's put this "certification tax" into perspective with an example from the auto industry.

Assume that you buy a new automobile for $40,000, drive it for 100,000 miles, and then sell it for $10,000. The cost of the "new license" for that car was $30,000 over a useful life of 100,000 miles. Conventional wisdom regarding the expenses for gas, oil, tires, maintenance, etc. for an auto is about $.25 per mile, or $25,000 for 100,000 miles. Therefore, the ratio of administration expense to "new license" expense for an auto is roughly 1:1. In order for a car to have the equivalent administration to license expense ratio of the software industry, we would need to increase the price of gasoline from $2.50/gallon to about $30/gallon. This $27.50/gallon difference is the tax you pay for driving a car that you assembled from "certified" parts. Imagine how different the auto industry would be if there was a “certification tax” on gasoline of $27.50/gallon? The auto industry would be tiny.

Now, imagine how much bigger the software industry could become if we could eliminate the $27.50/gallon “certification tax” that represents the administrative burden of assembling and maintaining components? Of course, there is nothing wrong with the PROMISE of certification, it is simply that the REALITY of it really stinks. Instead of a loud, technical guarantee of interoperability, it has devolved to a tinny, marketing whisper of “well, it ought to work,” or “it works for me,” or “cover your ass -- buy certified.” Maybe it is time for a new approach that truly lowers the administration costs.

Fortunately, the promise of software appliances and virtualization does just that. The application provider delivers the actual “automobile” instead of a “pallet of parts,” and provides a Lexus type maintenance experience – taking full responsibility for the outcome. Support becomes a latte in the lobby while you wait for your lube job instead of frequent rides in the front seat of the tow truck after each break down among the “certified” components. Which would you rather be doing? Sipping latte? Or continuing to pay the “certification tax” with little reward other than your first name relationship with the AAA call attendant?


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