Economics and the Independent Developers

Dave Winer writes that “The economics of software favor small independent developers, patents change that.” While I’m certainly against software patents (and very, very opposed to patents being allowed in W3C standards), I’m not sure that I agree with the economics favoring small developers.

In software, as in many other businesses, economies of scale can make a huge difference. Yes, a large software company can be filled with bureaucracy that prevents anything from getting done. Small companies would go out of business if they had that. But, here is what a large company (like Microsoft) has in their favor:

• A large base of code – We’ve all read about warring factions within Microsoft. But, if you look at their products you’ll see that there is a fair amount of code reuse and integration going on there. If a group at Microsoft is working on a new product that needs some spreadsheet-like features, I would bet they probably start with a chunk of the Excel code.
• Marketing $$$ – The majority of non-free software needs to be marketed well to be found. Microsoft has lots of money to spend on marketing, and has automatic marketing through Windows bundling (and through outlets like PC Magazine that review virtually every MS product released).
• De facto standards – It’s a lot harder for an independent developer to create a standard (largely because of the marketing).

If you’re only talking about innovation, then independent developers absolutely have the edge. I think that is where the innovation occurs 99% of the time. But it is very difficult for an independent developer to grow beyond a certain point. So, if you’re talking purely from a revenue standpoint, I think the BigCos have the upper hand.