The success of Aadhaar is important for India. Very important. It is a foundational pillar for nation-building (as in Aadhaar) . And it is really, really disheartening to see it being attacked and brought down.

The reasons for the opposition to the bill in the Parliamentary Committee per The Hindu article are,

Sources in the Committee say the Bill has been rejected in its current form on the grounds of the project’s high cost, as well as concerns regarding national security, privacy and duplication of the National Population Register’s (NPR) activities. One major sticking point was reportedly the Aadhaar project’s ambition to enrol every “resident” of the country, rather than every “citizen.”

A common misperception is that Aadhaar is linked to an entitlement program. It is easy to understand why there is this misperception. Today any entitlement program – PDS (ration card) or a passport – has the identification and entitlement program tied together. Sometimes, one entitlement program might use the identification from another entitlement program (a ration card can be used for many purposes other than getting rations at a Fair Price Shop), but there is no stand-alone identification program.

Aadhaar is a stand-alone identification program. It does not come with an entitlement program. It simply links a number/name/father’s name/address with biometric identifiers [Update: It is actually number/name/date of birth/address]. Every entitlement program comes with a set of qualifiers (PDS for BPL, passport for citizens…).

What qualifies someone for a government entitlement program can vary quite a bit. Aadhar cannot and should not duplicate a verification system for all these qualifiers. But once someone is qualified say by the PDS to receive a ration card, if the UID number is linked to the ration card, every time the beneficiary wants to get subsidized rice from a PDS shop, biometric identification is fast and infallible.

With that background let’s examine each of the reasons for opposing the bill.

Inclusion of “residents” as opposed to “citizens”

The people who raise this as a problem must be under the impression that the UID number by itself confers some benefit. But it doesn’t. Let’s say the Secretary in charge of PDS thinks that only citizens should get the benefit of subsidized rice and an illegal immigrant from Bangladesh should not. Perhaps he thinks that by giving a UID number to the Bangladeshi immigrant we are enabling him to “take advantage” of the PDS.

We are not. Whatever verification procedures are used by the PDS today to distinguish between an illegal immigrant and a real citizen should stay in place. The UID could be an additional layer of verification (you do have to show some government ID to get the UID) but it cannot and should not replace what PDS has in place. However, once the beneficiary’s qualifications have been verified by PDS, his UID is linked to his eligibility for subsidized rice. He uses biometric identification to get his rice.

The same logic applies to getting a passport or anything that is a benefit for citizens but not for residents.

But then you might ask, why not just have Aadhaar cover citizens and not residents. Here are two good reasons why:

- Residents may not have entitlements. But remember this is not just about entitlements from the government. There are KYC requirements for opening a bank account where UID can help. And non-citizen residents can also open accounts.
- To distinguish between a citizen and a resident is not an easy process. It is best done by other departments, like the Home Ministry. It would greatly slow down Aadhaar if they had to do it.

Issues related to privacy of those who have been assigned a UID number

Aadhaar has been designed to give answer’s to questions like “Is this man whose thumb is on the scanner, Ram Mohan?” It replies in yes or no. It does not answer questions like what is the name and address of a man whose UID number is 12345…

This is as good as it gets from a privacy standpoint. Now that doesn’t mean that it will be foolproof. Nothing is. After all there is a database somewhere where names and addresses and UID numbers are stored. But isn’t that true about any database anywhere in the world? If you want to live in the modern world and one day become a first world country you are going to have your biometric identification somewhere.

Home Minister P. Chidambaram has also raised issues about security weaknesses in Aadhaar. “The possibility of creating fake identity profiles is real” he writes. I can’t see how that would happen given that the biometric data has to belong to a real person and it can’t be someone who is already in the database.

Perhaps he means that non-citizens can get a UID number and that shouldn’t be allowed. As I have argued above, it is not UIDAI’s responsibility to qualify people for citizenship. The Home Ministry should continue using the methods they use today like police verification for passports.

The problem in tackling objections related to privacy or security is that the person who is in charge of security or privacy has to just think of scenarios where your system will break. An honest discussion about the probability of the event and it’s downside risk is never really possible if the people objecting have an agenda. And you can be sure that most people who are opposing Aadhaar have an agenda.

Duplication of work being done for National Population Register

I haven’t paid it much attention, but my guess is that the National Population Register is a program for identification plus it also classifies people into citizens and non-citizens. Why can’t the National Population Register use Aadhaar as its ID infrastructure? Or if it provides better ID infrastructure let’s do a “dare to compare” and pick the better one.

Aadhaar is not just a superior technical solution. It’s implementation is designed to be scalable at low cost. Which is why they have been making such rapid progress. It helps that Nandan Nilekani ran a multi billion dollar company tech company before he volunteered to do this. He knows how to do this. And he has just a single point agenda – he is in a position to do some good for the country and he is taking that chance. Try doing something like this with a politician at the helm.

The massive expenditure that the project entails

If you have a big country, it takes a lot of money. I have seen some estimates that the cost of enrolling the whole country the investment is just over $3B. Compare that with the cost of subsidies on food, fertilizer and petroleum at over $29B per annum. Some say that the leakages in just the PDS system are 85% out of a total budget of $12B. You do the math. And that is just the savings in one entitlement program.

The truth is that these questions about Aadhaar are not being posed by people who want India to have an identification system that brings us into the 21st century. I don’t know what their agendas are. But I do know that if 85% of PDS subsidies are leaked through corruption, the numbers are large enough that there will be powerful forces ranged against anything like Aadhaar that threatens the destroy the gravy train. I also know that a program with a $7B budget is big enough that people will want a piece of the action. And if they can’t get it, the next best thing is to bring the whole thing down.

If I can’t get mine, nobody can. India be damned.

And boy is he angry. A couple of days back, Robert Scoble, who hopefully needs no introduction to readers of this blog, posted a rant on the usability of Workday which his employer, Rackspace, uses for employee travel expenses. A quote is below. The video is far more telling. In that, Scoble is visibly frustrated and angry.

It’s not everyday I complain about software, but, sorry, Workday really sucks. If you are considering an expense reporting tool, get Expensify.
Why? What’s wrong with Workday?
It’s slow.
It constantly gives me errors and doesn’t let me enter data.
It isn’t easy to enter lots of data.
It doesn’t hook up to my credit cards.
It doesn’t have a mobile app to upload photos of receipts.
It doesn’t let me do milage by entering in a start and end point on a map.
Expensify is far superior. It takes 1/100th the time for me to do an expense report there than in Workday.

Commentators have wondered about Scoble’s motive here. Workday Rising, Workday’s annual user group meeting roughly coincided with his rant. Was it designed to stir up controversy at just the right moment for controversy to strike? Bloggers thrive on controversy, do they not?

But I totally get where Scoble is coming from, foam-flecked tirade and everything. I call it Enterprise Rage. It is similar to road rage. If you have it, you feel like stepping out of your constrained space (car, cubicle whatever) and punching somebody in the face. Or screaming your head off, if that takes your fancy. But you can’t because you’ll get fired or run over. So, those who can, make videos and vent. Others take up hobbies or rack up therapy bills.

Enterprise Rage can be caused by many things. For instance, things that are wasteful and frustrating and don’t have to be. Like submitting an expense claim.

Workday is a new breed of enterprise software company that I hear does care about usability. And expenses is not central to what they do (but then does that mean you can put just anything out there?) But even so Workday would be an exception. Enterprise software vendors, in general, don’t care about usability.

Why? Because enterprise software does not have to bother about usability. Their software is demoed and sold to executives. Executives care about dashboards and business intelligence. Will I be able to use it from my iPad? How many hours before I can get that report? Ooh, that pie chart looks so good. Can I have it?

Feature, function matter of course. But usability in the hands of employees is rarely a selection criterion. Executives have assistants to log expense statements. They don’t even know there are usability or performance issues with the expenses system. And the employees, poor sods, can’t get their expenses reimbursed without using the system.

The problem of bad enterprise software never rises to become a big issue in companies. Mostly because employees are not given a choice. If the software isn’t working, work stops of course. But if it is, there is no other way of getting your work done. It might be difficult to learn, difficult to use and slow as molasses but hey, who said you had to work just 8 hours a day. Besides, if a company has already spent millions on the software and its implementation, airing grievances about its usability is generally not encouraged.

There is one area, though, where usability already greatly impacts the value the company gets from the software – CRM. Unlike with other workflow type software, where there is no way around, with CRM, if the salesforce doesn’t like the CRM, information just doesn’t go into the CRM. Sure there’ll be some mandatory pipeline updation, but not much else. The rich, stream of customer meeting notes which are invaluable to team-selling are all lost to emails and phone calls. Or just plain lost. I’ve used at least half a dozen CRM systems extensively in my career and the best one in my opinion – Highrise from 37signals. Not surprisingly it was designed for small sales teams. It wouldn’t work for any large enterprise, but it is so easy to use for the sales person, there is no need to coax, cajole or threaten them to just “use the damn system”.

Enterprise software vendors need to wake up. Employees now know what a good, performing user experience feels like. They use a whole bunch of great software in their personal lives from companies like Google, Apple and Twitter. Also, for every Workday, there is an Expensify that is born in the competitive cauldron of small business software where assistants are rare and software with sucky usability won’t survive.

Two, productivity in the US and other advanced countries has been inexorably rising even through the recession. Which means that higher output is expected from employees. You can’t expect more out of employees and give them crappy software to work with. They tend to get upset and go vent on their favorite social media site. If they are someone like Robert Scoble with a big megaphone, the software vendor better watch out for its reputation.

There will soon come a day, when prospective employees will first inquire about compensation and benefits. And then they will ask “What system does your company use for collaboration/crm/expense reimbursement?” Maybe not while we are in this economy. But the time will come.Till then, expect more of the same.

On Wednesday, as I trudged out of Oracle Open World after Larry Ellison’s keynote, I learnt that Steve Jobs had passed away. It threw a pall of gloom over me and most of the attendees.

The world is poorer without Steve Jobs.

On Thursday I was talking to my 15 year old son about the significance of Steve Jobs and how he was being compared to Thomas Edison. He was curious. “Was Steve Jobs an inventor like Edison?”. No he wasn’t but in Edison’s days, a single invention like the light bulb could directly become a product. Today, there are hundreds of patented inventions that go into a new product. They come from different companies that have scientists in many different streams like material science, semiconductors, manufacturing technology and software.

No Steve Jobs wasn’t an inventing genius. But he was a creative genius like Edison. And they were both great businessmen. Apple at the height of its market power (today?) is as awe inspiring as General Electric ever was. Probably more.

In 2008 I switched from a Windows laptop to a MacBook. Before that the only Apple product I ever owned was an iPod. My experience with my MacBook was so superlative that I became a fan. In the short time since my first MacBook I acquired an iMac for my son, an iPad, an iPhone, Airport Express, AppleTV and Time Capsule.

To me, Apple is exceptional in two ways. First, it melds, like no other company, these often conflicting objectives – functional design and visual design, usability and feature/function, software and hardware, engineering and beauty.

Two, it seeks to excel, to set the standard in whatever it does. Look at the way it reinvented retailing in Apple Stores. And in a field that it entered in the last decade. Today retailers around the world look to Apple stores as their role model.

Steve Jobs was essential to both these things. When conflicting objectives collide and trade offs had to be made, he made the important ones. And when a product was not up to snuff, it went back to the drawing board, again and again until Steve thought they had it right.

Apple may still have all the same creative geniuses that they had last week. But how do you replace this dynamic of a “Chief Designer & Chief Executive Officer”?

In 1994 when I came to the US my great regret was that I had not been able to see Michael Jordan play. That was soon remedied as he came back to the NBA. But this time, there are no comebacks. I can only wish I had gone to an Apple conference to see Steve Jobs on stage in his element.

R.I.P. Steve Jobs. This Macolyte mourns you.

xkcd has a cartoon that beautifully explains why strict password rules have brought us to a pass where it remains relatively easy for a computer to hack the password. But very difficult for people to remember them.

My company, like most large corporates, has a password policy that forces the use of numbers, large caps, special chars and minimum password length. The password expires in a month and you can’t use the last 20 (I think) passwords. The strict policy lives up to its promise. It is a unique password that I don’t use for any other service, that has enough gobbledygook in it to render it unguessable to human beings.

I also use a few financial services that are, or should be, concerned about security. Even if they weren’t, I do try to create strong passwords for them since they have my money. But its not so simple.

• My broker in the US doesn’t allow special chars
• My broker in India allows only a 7 character password (no more, no less). Strange, but true.
• My bank in the US has a strong password policy. Not as strong as my company’s but close. No expiry rules.
• My bank in India allows weak passwords but requires me to enter my password on a virtual keyboard. I guess they are more worried about keyboard loggers than the others.

Having the same password for all such services would make my life much simpler. But I can’t. Because they won’t let me.

Some security experts think that that may not be a good idea anyway. If you have the same password for many services and someone cracks one of them, they get control of all services. OK, but then isn’t that true about OpenID too?

Actually, I do have different passwords for different services. Partly because I have no choice. But even for services where I could have a common password, like the social media sites, I don’t. I have seen many people lose control of their Twitter, Facebook or email accounts because they got hacked. Scares me to death.

Which is all very nice and secure. Until it comes time to recall passwords.

The truth is that you can’t remember all these passwords. So you store them somewhere. And the moment you store them somewhere, a hacker is one password away from taking over your life.

I don’t see an easy solution to this. Long phrase passwords, as xkcd suggests, might work well because they are easy to remember but hard to hack. But no password policy implementation can detect the difference between your full name and father’s name (terrible password) and a collection of random words (great password). Maybe an OpenID type service that requires a hardware token like SecurID could offer both ease of use and high security.

Till then, there’s always post it notes.

Photo: Johan Larsson

Startups don’t have IT policies. For the past few years I have been using email in the cloud, a MacBook, an Android phone and have not been within miles of a securID card. All that changed overnight.

Infosys, like most major corporations, takes information security very seriously. Actually, because its policies have to be at least as strict as its most security conscious clients, Infosys is probably an outlier, even in the corporate world.

All very necessary and reasonable. But I am going to miss my personal tech freedom. Most people who have gone back to work for a large company know what I am talking about.

The world around them is changing, and companies will have to respond to it. Current IT policies are based upon a “two state” view of the world. It sees the “employee at work using company computing infrastructure” and “employee on her own time, on her own device” as two states, separated by time and space. This is increasingly untenable. Not only does it not reflect the reality of the life of information workers, it is also easy to argue that this view of the user is not in the interests of the company.

In today’s shrinking world, a major corporation is open for business in some part of the world at all hours. Employees have to be open to this 24X7, always-on kind of work environment. The boundaries between company time and personal time are blurred. Should the employee have to keep switching between company and personal devices?

If I go for a two week trip to Asia Pacific and carry just my company devices with me, can I put my personal life on hold? I might have to pay my bills, answer personal email and yes, even lookup my friends on Facebook. I might want to catch my favorite weekly show on HBO. Should I have to carry two laptops?

I could also argue that IT policy based upon this “two states” world view is not in the interests of the company. Let’s say a new employee is hired into a tax advisory firm. He is an expert in say cross-border taxation issues. For years he has kept notes in Evernote. But now he can’t bring those notes inside the firewall because of the lock-down environment in the company. That can’t be a good thing for the company.

Further, the taxation expert has a twitter account and a blog which connects him to other experts and people interested in his field. These are personal accounts, but the company gains from his network and reputation. The company gets leads because of his online presence.

Another problem is the consumerization of computing technology. There was a time when the IT department could standardize on Windows and Blackberry and few employees would be disappointed. But now Macs are a real corporate alternative. And iOS and Android phones and tablets outnumber RIM devices. Their users love them and will keep the pressure on IT to let them use these devices.

Fragmentation always costs more and IT departments hate it. But how long will they be able to hold up against employees who want their own device?

Which is why regardless of the challenges, Bring Your Own Computer and Bring Your Own Device are here to stay.

Watson created a wave of good PR for IBM, its developer. And rightfully so. I think it is indeed a big deal.

Before I get to why I think Watson is a big deal, take a minute and read this Wired article on how Watson was set up for Jeopardy!

The computer is fed the answer in text form at the same time the answer panel appears to the two human players. Watson then queries its database for an appropriate question response, a process that doesn’t involve using the internet at all.

…Watson then must push a physical buzzer to respond, just like its human competitors.

They went to great pains to level the playing field. So it would seem that Watson truly bested its human competitors. So how did it win?

I believe speed was the biggest contributing factor to Watson’s performance. There were many questions to which it got the wrong answers. But the one’s that it knew, it just beat Rutter and Jennings to the buzzer.

Jeopardy! allows contestants to hit the buzzer only after a light comes on. They are penalized by a fraction of a second’s delay if they hit the buzzer before the light comes on. Champion players like Rutter and Jennings, anticipate the light and hit it almost immediately after. But they still have a disadvantage over Watson.

From the New York Times

Watson, on the other hand, does not anticipate the light, but has a weighted scheme that allows it, when it is highly confident, to hit the buzzer in as little as 10 milliseconds, making it very hard for humans to beat. When it was less confident, it took longer to buzz in. In the second round, Watson beat the others to the buzzer in 24 out of 30 Double Jeopardy questions.

I couldn’t tell you why IBM made Watson take longer to buzz if Watson was less confident. Perhaps, taking a bit longer would help it arrive at a better answer. Or perhaps IBM wanted to handicap Watson just a little so that it appeared like it was a fair contest.

Watson would also have read the question faster than its human competitors. However, human beings process as they read. Watson would have read the question instantaneously and then processed it. So its not strictly comparable.

But Watson’s speed advantage would have been worth nothing without its ability to understand the question and find the right answer. And that’s where the magic of Watson lies.

Watson could understand natural language. It could understand the question. It could also understand the encyclopedias and other content that went into its database. To make that happen is very, very difficult computer science.

If you look at the Algorithms team at IBM that worked on Watson, you will sense that a lot of natural language processing techniques went into the development of Watson. Probably a whole bunch of statistical methods as well. And some serious brains.

Watson is a big deal because it changes the paradigm of the human/computer interface. Today, human beings interact with computers by giving it very precise instructions in a limited syntax. Like clicking on a button on Facebook, or running a program in Python. Even if you say something in a natural language (like English, not Python) like what you might type into a search box, the computer does something reasonably well defined with the words. It doesn’t try to understand what you said.

Take Google for instance. You type in keywords into Google search and it will return links to pages with those keywords.

You might enter a question “Is Preity Zinta married?” and Google will return links to pages which have these words on the page. After a few clicks you might conclude that she was expected to marry Ness Wadia, but then broke up. But you would have click on some of the links to figure that out for sure.

Google search does not understand your question. It simply takes it as a “bag of words” and pulls up pages that contain those words. It does many clever things to determine how to rank the results. But to Google “Zinta Preity Married”, which doesn’t mean much, is the same (more or less) as our question above. It does not try to understand the question.

Nor does it answer your question directly. It makes no inferences from the content it puts on the search results page. It just brings you as close as possible to the answer by pulling up the most relevant pages and within them the most relevant snippet on the search page. Good as it is, it’s no Watson.

Would we benefit if Google search understood our question, or at least our intent a little more? Sure. And Google has been making steady progress on this front already.

If you enter “time in India” in the search box, Google returns links to pages with those key words. But right at the top, it just gives you the time in India. It assumes that you are probably looking for the current time in India. Similarly if you look for CX870, the top result will be the flight status of a Cathay Pacific flight from Hong Kong to San Francisco. If you enter 2+2, it doesn’t even bother looking for the keywords. It just returns the answer viz. 4.

These were use cases where you were trying to “find” some information. What if you wanted action, rather than information. On my Macbook I use Spotlight to type in the first few letters of an application and hit enter. The application fires up. You might call this a key word based action. Pretty basic.

In Google Calendar, there is a neat feature called Quick Add. In Quick Add, I can write “Lunch with Gaurav at 12pm on Monday” and the Calendar will add an event called Lunch with Gaurav, from 12 to 1 on my calendar for next Monday. It accepts input in a variety of forms and has a lot of flexibility. Just as my human assistant would understand me if I told her to schedule me with Gaurav at 12pm next Monday, in any of a dozen ways.

But that is as far as it gets as far as natural language processing goes in every day applications. Watson takes us well beyond that.

Human language is one of the most complex things about human beings. They are biologically wired for language. All languages have basic underlying constructs that are universal. Our language separates us from other living beings. And from machines.

And that is why Watson is a big deal. It is an important step in the journey of getting a machine to understand human language. And yes, making it work in the limited context of Jeopardy! is a far cry from making it a general purpose semantic search engine. And maybe one shouldn’t even expect that. I don’t understand half the things I see on Twitter, myself, so how can Watson? Nevertheless, it shows us the possibilities. And aspiration is what drives human endeavor, doesn’t it?

Can Indian digital music become a legitimate business? Or will it stay stuck with a 20th century distribution model?

You might say that Bollywood is already digital. You already get popular music on iTunes and amazon.com outside India. But the problem is that Apple and amazon.com are force-fitting their template for western music onto Bollywood music.

Take pricing. iTunes pricing for Bollywood songs is its standard 0.99c. Amazon.com is the same, though I saw a few songs for 0.89c. The Dabangg CD costs what? Rs. 150? For 10 songs. That works out to 0.33c per song. And the shame is that the 0.99 pricing is not because the Indian studios want that pricing. It is because Apples forces a standard template on everyone.

There are a bunch of other things that I would expect from a music service that specialized in Indian music. Don’t expect these from Apple or amazon.com. Correcting spellings, for instance. I find the “did you mean ….” in Google is very helpful. But when I am looking for music on iTunes for the movie Awaara, I don’t know how it’s spelt. Aawaara picks up something, so does Awara, but neither is Raj Kapoor’s Awaara, which is what I want. It should be so easy to build an intelligent, forgiving search for spelling Indian movies in English.

Here’s what came up when I was looking for Dabang on iTunes (instead of Dabangg).

Indian popular music is about the movies. The movie is part of the experience of the song. It is also a revenue making opportunity. Sell music videos. The cross sell opportunity between music, music videos and the movie itself is enormous. It is not being leveraged at all today.

I am sure Bollywood executives wonder about how to leverage this opportunity. Indian music is just too different. It’s not just a matter of pricing. Waiting for Apple or amazon.com to wake up to the opportunity is not the answer. So what do they do?

There is a way opening up. Because of Android, 3G and more broadband.

As I write this, I am listening to Shreya Ghoshal on iTunes/MacBook – WiFi – Airport Express – Denon receiver – Polk speakers. But most digital music is consumed through a portable player. The world’s dominant portable music player is the iPod (and the iPhone). The iPod never really caught on in India. Neither did the iPhone. Too expensive. So most of the market comprises of cellphone mp3 players.

Android is going to be big in India. People who own cellphone mp3 players today will have Android phones within 2 years. Android is the perfect platform to build a digital music player for. And its user base will have size and depth.

I think Bollywood should do a Hulu. Two or three leading studios [labels] should come together with a VC and form a company. The company’s mission should be to build a digital music business in India.

There are many models out there that could be candidates. Download with/without DRM (iTunes, amazon.com), Subscription (Spotify), Streaming and ad supported (Pandora). The technology too is mature. Scores of Indians in the Bay Area have the expertise to build digital media systems.

The key challenge is on the deal-making side of things. The ownership of copyright in India is a little more complicated than in the US. Also, the industry is more fragmented. To get a critical mass of copyright owners on board will take a lot of doing. But hopefully, the opportunity ahead is what will convince them to sign up.

I write about the economics of Information Products often and have used the term marginal costs several times over the years in connection with digital music, e-books and of course the technology industry. So perhaps it is important for readers to understand what I mean when I say marginal costs are zero. In the process, I’ll also examine Bob’s claims to the contrary about the software on an App Store.

Wikipedia’s definition of marginal costs is

…marginal cost is the change in total cost that arises when the quantity produced changes by one unit.

Effectively, when I say that apps on the Mac App Store have a marginal cost of zero, what I am saying is that the next user of Angry Birds or Evernote or Omnigraffle, incrementally costs these companies nothing.

Compare this with Gap jeans. The next pair of Gap jeans sold will cost Gap a pretty sizable portion (maybe 50%?) of the sale price of the jeans.These costs are the material, manufacturing and shipping costs. And maybe a few others as well.

Bob’s rebuttal rests on three types of costs that he says prove that the marginal costs are not zero.

Engineering costs related to updates

Engineering costs are fixed costs. They have no relationship to the units of software sold. Sure, if you sell more units you have more money to spend on engineering, but that is conflating cause with effect. Think of the Gap jeans analogy. Is the next unit of Angry Birds sold going to need any extra cost in engineering? Nope.

Support

Support is a little trickier. If the app you are buying includes support over email or the phone, yes, there is a marginal cost here. But apps, and indeed, most consumer SaaS applications now direct users to their forums. On the forums, they either find the solution to their problem themselves or they post a question and a super user answers it for them. Often, someone from the company’s support team will have to answer the question. And so you might say that as the number of users goes up, the queries on the forum go up and the size of the support team must also go up. 

But, there is another dynamic at play here. As users grow in number, the knowledge base on the forum also gets richer. The number of super users also increases. Problems with the software that lead to support queries are ironed out. Does all this compensate for the upward pressure on support costs? I don’t know. Probably not. But for these kinds of apps, after a certain user base has been achieved, incremental costs are not material, in my opinion.

Server side costs of processing, storage and bandwidth

Even if the software downloaded is simple desktop software with no SaaS component, there is the matter of the first download and subsequent updates. And presumably, the traffic created by polling to see if an update is required.

I understand that these costs, for an additional user, are not zero. But there is something called materiality. Is this particular cost material compared to the revenue from the next user? I doubt that Angry Bird or Omnigraffle worry about it. Evernote perhaps does, but how many apps do you know that users regularly use to scan and upload documents to? 

Two endnotes

In software, there is always more that can be done. More products, more features, better performance, better customer service. The only thing holding it back is the money available to do all this. As a company grows in customers and revenue, it expands its engineering and customer service teams. Because it can. But this is not because of marginal costs. The causation is the other way.

Marginal costs is a construct used in Economics. In real life, you can never really parse out marginal costs from fixed costs with any certitude. Nor should you waste your time doing it. Managerial decision making, most of the time, doesn’t need numbers to be precise. So when I say, marginal costs are zero, but they turn out to be 2% of the unit price, it is not going to result in a different decision on whether one should be on the App Store or not.

Nowadays, it seems everyone is launching an app store. Google Chrome has a Web Store. Amazon.com announced an App Store for Android Apps, that will compete with Google’s Marketplace. And of course, there’s the big daddy of app stores – App Store on iOS for the iPhone and iPad.

For the App Store owners the motivation is straightforward – an additional revenue stream. Apple charges 30% to App developers plus a registration fee. For everyone this is an additional way to monetize users and a platform.

But what’s in it for users? Quite a bit, I believe. Which is why I think App Stores will succeed for mobile devices, consumer apps and enterprise apps.

1. Inventory – Why is inventory on display important for a retailer? Because customers like to have options. If I’m buying a flat screen TV I want to see different models from different manufacturers, side by side and compare. Also, importantly, inventory on display means that I can, right there and then, buy a TV that I like and take it home. It’s the same thing with Apps. Having thousands of them in one place is of great value to the user. Yes, I could go put Personal Information Manager in Google search and then 20 mins later I might have a list of PIM software. But why go to the trouble?
2. Confidence – When I see a TV at Best Buy, I know that their merchandising team would have done some due diligence on its quality. It gives me some confidence. On an App Store too I expect that Apple or Amazon.com would have tested the product to see that it works and won’t do anything malicious.
3. Transparency – The App Store is Apple’s, not the software company’s. They can’t keep poor reviews or ratings out (although they can load it with positive ones). There is some level of transparency. You can’t hide your warts on an App Store. Bad for the App developer, good for the user.
4. Payment mechanism – Do you want to enter your credit card details at every app developer’s website? I don’t. Apple, Amazon.com and Google checkout all offer an easy, secure payment mechanism.
5. Auto updates – a much easier way to keep Apps updated.

Is the 30% cut of revenues too much? It depends on how much you expect your revenues to go up by. After all, software has no marginal costs. Every dollar of incremental revenue is a dollar of incremental profit (before taxes).

For small app developers its a no brainer. For established players like Omingraffle, if a significant portion of their revenue stream gets diverted to the Mac App Store, they will need to make up for what they pay Apple in App Store fees in the form of incremental revenues. I suspect that will happen. In any case, they don’t have an option. They have to be available on the Mac App Store.

I see App Stores taking hold and becoming a fixture. Which means that making a platform successful (Force.com, Google Docs) suddenly became worth a lot more.

Here is what I am looking for:

1. Syncs transactions with brokerage accounts.
2. Allows looking at performance on a consolidated basis across accounts. I own a few stocks across multiple accounts. I want to look at how on a consolidated basis.
3. Includes dividends and reinvested dividends intelligently into calculating performance.
4. Allows XIRR calculations by security. XIRR immediately shortens the list. Total gain/loss on a stock is not a very interesting number.
5. Ideally, I should be able to take any window of time to see how a stock has performed in that window. Also, of course, on a consolidated basis.

Schwab, of course, has nothing even close. They are so scared of making errors that they throw up a warning window every time I try to download a csv file. Can’t trust them to venture out this far.

I like mint.com for keeping track of expenses etc. but their investment management totally sucks. Pretty charts that are all horribly wrong, worthless or both.

A friend told me that Quicken takes care of all of these requirements. Unfortunately, Quicken gives the Mac platform short shrift. The last version for the Mac is from 2007 and the reviews are not good. No 30 day trial, so I passed. If someone has used this version and thinks it works, leave a comment.

iBank from iggsoft was supposed solve this very problem. The poor cousin treatment that Mac owners get on software for personal use. Tried it out. Couldn’t even set it up. No way to upload a csv! At least I couldn’t figure it out. For the transactions I could upload it seemed like it didn’t meet my criteria.

So my search continues. In the meanwhile, I put together a Google Spreadsheets solution, which meets all my criteria, except the windowing. Google allows you to call the price on a stock as a formula which is quite neat. The only problem with this is that transactions must be downloaded from the brokerage account and cut pasted into the worksheet every once in a while. I don’t trade much, so my solution works for me, kind of. At least until someone comes up with exactly what I want. But does that ever happen?