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Why don't people realize that 'high software profit margins' are fugazi?

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One thing to consider is the capture caused by network effects and interoperability. You need to use Microsoft PowerPoint because your interns know it, your clients expect it, all your old presentations are in .pptx format, etc. Sure, you may be willing to consider some alternative in theory, but someone would need to produce a competitor that is nearly 100% compatible with all of your other stuff and compete at price point that is incredibly compelling. Are you going to do it?

Another thing to consider is that there is such a thing as "value" to capture and companies are thinking about how to bring their core competencies to market while outsourcing everything else. They need an off-the-shelf product to do something that isn't their core competency and they will take the best one on the market at the time at whatever price they need to pay so long as it doesn't upset their price structure and bring their costs out of line with their strategy. An armchair philosopher can ponder for years where value and cost comes from, but if I can spend one dollar to make ten then I'm going to do it whether the thing I bought for a dollar is theoretically worth it or not.