Because Demand Curves Slope Downwards

Whenever someone asks me if Force.com‘s superior productivity will put in-house developers out of work, I struggle to avoid launching into Economics 101. It seems appropriate, though, to review those fundamentals in response to yesterday’s eWEEK story about application development budgets on the rise.

Demand curves slope downwards. That is, when the price of something (on the vertical axis) goes down, the quantity demanded (on the horizontal axis) goes up.

If technology improvement shifts the supply curve outward, so that a larger quantity is available at any given price, we can expect the market to settle at a new intersection point where price has gone down while quantity produced has risen.

But if you really want to see something exciting, don’t just shift the supply curve to the right. Flatten it. Introduce a technology change, something like metadata-based customization using clicks rather than code.Make it possible for incrementally more development to be done by someone whose skills are not as scarce, and whose cost is therefore no more, than the person who was previously doing the most advanced development that you could afford to have done at all.

If the supply curve approaches a horizontal line, with additional units of development output available at almost invariant cost, the quantity demanded will shoot off far to the right. The area of the rectangle defined by the product, price x quantity, will be enormously more than it was before: that product, of course, is the total spending on the service or the good that’s under discussion.

That’s why it’s great for developers, as well as for those who pay them, that Force.com makes developers more productive — and even that it enables much routine development to be done by “power users.” What this means is that the incremental hour of work, by someone with any given level of development skill, is now worth more than it used to be. The supply curve is shifted right and flattened out: the total amount of money that’s now worth spending on development goes up, and up, and up.

If anybody’s unhappy with that picture, please tell me why.

Published
August 19, 2009
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