Switching Costs in Software Development

If you have an MSDN license through your employer, Azure offers $50-150/mo credits depending on license types for dev and test environments. I've never run into issues getting feedback on prototypes in test from real customers, nor have I ever broken through that credit on a single app. Occasionally I'd pass $150 if we were running 3-5 apps simultaneously all with some measurable load but often the "usage" was in the $5-50/mo range.

Whether your employer will let you use their credits for personal use is another issue entirely (I've had several who didn't use them at all and several who let you use some).

You could pay for the care and feeding of five developers for that kind of money (including taxes, infrastructure and support costs).

Maybe something to consider in future build vs buy decisions.

Hi. Can I help you burn your money?

When I tried out the AWS free trial thing, they had some issue where EC2 instances would become totally unreachable within minutes of being created. Support asked me to leave some bugged instances running so they could investigate. Then I was billed for these instances. I asked for a refund, but Amazon says they have no record of the charges, even though I can see them in my Amazon account.

Great.

This. I'm struggling to remember the right game theory term here, but there's a mismatch between what you want for yourself and what you want others to do. It's great if other people to pick the service with the smaller market share, thereby increasing competition, but you yourself probably want to stick with the larger service because of the various network effects associated with being part of the larger service (e.g. not going out of business, third party service compatibility, etc.).

Ditto. I used to work for a bank and they had this same issue. Requesting changes to the system cost a lot more than was actually involved.

I think he's saying, if no one chooses the underdogs, the overdog (e.g. Amazon) will have a monopoly and can (and will) take advantage of the high switching costs to gouge their customers.

the company with the smaller market share cannot make moves so easily because can't afford to lose customers and even more market share, so it will be the nicer guy probably

The argument is that if no one chooses the underdogs, then eventually there'll be a monopoly and no choice, regardless of switching costs..

That's very very true. However, "fair pricing" is mentioned because companies tend to use the term in their marketing explanations for raising prices. In free markets, it is also the responsibility of consumers to understand not only the prices they pay today, but the prices they allow companies to set tomorrow.

You are right that pricing on costs is not how it should work. A better pricing would be based on the value created. In this case however the value created correlates to the man hours saved (vs. e.g. managing instances manually without the tool). And since manually managing a large instance is not more work than managing a smaller one, there is no additional value created, so the pricing logic is unreasonable.

>> I always wonder why people think the only 'fair' pricing is pricing based on costs. This is not how free markets work.

In a real free market that is how it should turn out. If someone is charging too high above cost, a competitor will likely step in to grab market share by offering the same thing at a lower cost. Companies go to great lengths to make the playing field uneven - "unfair" practices, unfair employment agreements, patents (government granted monopolies), lobbying for barriers to entry, etc...

Lots of people like to talk about "free markets" when they really want no such thing. In a real free market, everything tends toward commodity pricing.

This is a very good point. Even if you don't want to self-host and you'd rather use a service, having the software available as open source so you can self-host if you so choose, makes it more rational to use the service, because it makes it harder for you to be screwed the way OP's startup was.

But you can bet what then most of your customers do, right? This sounds good in theory but is really tough in practice ...

I think the "sunk cost fallacy" is related here, although I'm not sure how to draw it out.

In general, it seem obvious if any third-party platform is irreplaceable for your business, you are running a significant risk. I'm not sure "irreplaceable" is always correlated with number of hours you've sunk into it.

It could be irreplaceable despite having very few hours sunk into it.

Also, even if you've sunk a bazillion hours into it, if there's a viable replacement that could be put into place _without_ spending a corresponding bazillion hours on it, it might not be irreplaceable at all. (This part might be the 'sunk cost fallacy' -- just cause you've spent a lot of hours on it, doesn't neccesarily mean it would be a bad idea to throw all that away and start over -- if you can afford to.)

Anyway, the hard part, of course, is avoiding an irreplaceable dependency on a third-party platform. Especially because using such third-party platforms significantly decreases your total cost to launch or operate. The trick is figuring out how to take advantage without making them irreplaceable. I'm not sure there are any obvious or easy answers. Using the option with the smallest market share, as the OP suggests, might help encourage a better marketplace, but probably _increases_ your actual direct local risk.

As an East-coaster, it's always a delight to hear about products "in the wild" where you've actually met people that worked on it!

That was the first that came to my mind too.

they've got a long way to go before they are on par with what GCE or AWS offer. They do have a nice offering though, just nowhere near what I need.