[Manifold-l] Manifold reference clients

[Dimitri Rotow]

I think it's time to remind everyone of the price strategy Manifold has
always espoused, a strategy that has served us well for years. [I think I
end up inflicting an essay like this every year or two, so apologies to
those who have suffered through previous versions... :-) ]

First a comment: much to our regret the market has consistently demanded
higher pricing from Manifold than we have wanted.  If you go back to the
dawn of time (the late '90s...) you can actually find advertisements for
Manifold at $97.  I believe that 4.50 first came out at $145. The company
was designed to be profitable at well under $100 per unit revenue.  There
were good reasons for that, as this essay describes.

You have to remember that manifold.net came out of the crucible of the PC
clone wars in which the Wintel clone architecture established its hegemony
over desktop architectures, nay, more to the point *defined* the idea of a
unified desktop architecture.  People often forget that what made that PC
architecture a universal standard was the cloning of IBM's "PC" architecture
by a horde of mostly-Asian vendors.  They rushed in where larger companies,
like HP, DEC and others, hesitated to tread.  And not only did they
collectively standardize upon a clone architecture, they pushed price down
to unprecedented levels by combining Chinese focus on price reduction (and a
Chinese willingness to be personally hardened in the effort) with US
attitudes to hardware and software and a connection to US and other first
world markets.  It was that combination of early adoption by many deft
players together with a low price that opened ownership to billions of
people that established the Wintel clone standard.

There were thousands of companies and their suppliers hovering in an orbit
around Intel, the BIOS vendors, etc. Some made their own motherboards and
did complete systems manufacturing and some simply put together components
like motherboard and chassis.  Many, like Dell, started by assembling
systems and then moved up the food chain to manufacturing more and more of
their own parts.

A hallmark of the day was the relentless price pressure exerted upon all
such participants by what insiders at Intel referred to as the "Chinese
factor."  This was before mainland China took over all production, but
already Taiwan was manufacturing incredible value and Chinese owners and
managers were establishing expatriate operations in Silicon Valley and
elsewhere to apply Chinese sensibilities with  a ruthless focus on cutting
cost.  Because of the low price and high quality established by such
operations everyone in the clone business was pressured to stay competitive.
Even very large vendors like Compaq, IBM and (ultimately) Intel itself and
DEC could not get too far out of line.

"Being Chinese" (something we Westerners aspired to... the phrase was not
used as a pejorative but rather as an esteemed objective) meant achieving
that ruthless focus on the essential, to deliver maximum, total value
without sacrificing quality or performance.  It's amazing just how much cost
is wasted in business on nonessential guff that has no bearing whatsoever on
quality or performance.  Being Chinese is a meditation on the essentials and
a willingness to harden oneself and one's organization into a ruthless
competitor.   The phrase now is very dated, but the lessons remain the same.

The key lesson is to be hard, be tough, be focused on the essentials and
above all to drive your costs and your prices down before the competition
has any chance at all to do it to you.  In those days that meant clone
businesses would set up in warehouses without a shred of carpet or fancy
furniture or even lobbies or offices.  All was done on the production floor.
I remember one day at a clone facility they heard that WalMart headquarters
was so famously cheap that when salesmen came to call WalMart did not
provide them drinks but instead pointed to a soda machine in the lobby from
which they could buy soda.  They all laughed at WalMart's profligacy in
wasting that floor space on the machine - the Chinese clone ethos was that
the salesmen should come fed and ready to work without wasting your floor
space on luxuries such as soda machines.  [WalMart says they make money on
that machine, but I doubt they actually do. :-)]  

Another lesson on being hard is looking at the heart of the business,
cutting out all the fluff and doing the essential core at such a low price
with such high quality and superior performance that you kill off all the
competitors who continue to carry the cost burden of fluff.  The analogy in
the GIS business is that if you provide a truly superior GIS product at
1/20th the price of competitors it really does not matter whether or not you
send people off to trade shows. You're going to kill off competitors who may
do a great job of delivering the warm fuzzies at trade shows but who fail to
match your accomplishment in the heart of the matter.

Competitors who disdain price competition are being lazy and degenerate and
are setting themselves up for a big fall when they encounter someone who
knows how to wield the price weapon.  Price competition is not simply a
lower price: it is a *much* lower price combined with *superior* quality and
performance. That takes a very hardened and expert crew to pull off. 

I can't think of any other market that had so much fluff and excess price
gouging in it as the GIS market before Manifold.  In fact, the existing GIS
market consisting of the likes of ESRI was so soft and degenerate that just
about anyone who came out of the crucible of Being Chinese who entered that
market would tear into those softies like a bunch of tigers cutting into
overweight sheep.  In the case of manifold.net, the company was designed by
battle-hardened veterans who had successfully beat the life out of their
competitors in the clone industry.  So the company was put together based on
truly ruthless outlooks as regards price / performance.

That's why Manifold was designed to excel at sub-$100 pricing.  In fact, the
original break-even design was for $45 a unit, taking a page from the
Borland launch. These sorts of numbers shock the living-fossil GIS marketing
types, but the point is not to look at prices as they are - the point of
Being Chinese is to look at prices where they can be pushed, to get there
first and, while increasing quality and performance, to use the price weapon
to behead your competitors.  

So how did pricing on Manifold rise above $100?  We discovered that to
penetrate classical GIS markets, which we needed to do to recruit long-term
GIS users and experts to help guide the evolution of the product, we had to
increase the price or no one would take us seriously.  It's that simple.  If
we could keep a sub-$100 price for all other users (those entering from
Microsoft Office, for example) and maintain a higher price just for folks
coming out of the classical GIS market we'd do so.  But we were not able to
figure out any ethical way of having two different prices for the same
thing, so we simply evolved to a price point, $245, that worked reasonably
well for both markets.

But even a $245 price was not enough.  We had constant complaints from
Manifold users within larger organizations who said that unless we could
increase the price by a few hundred more their organizations would not take
Manifold seriously.  We were advised to create a series of new part numbers
that would be identical but for the name of the product and the higher
price, for the sole purpose of catering to the prejudice of larger
organizations.

That we were not willing to do (that dang ethics thing again...), but once
Manifold acquired bona fide "enterprise" capabilities we could see our way
clear to configuring higher-priced products that were legitimately
differentiated by the presence of "enterprise" features.  But at all times
we have endeavored to maintain a low price point for those users who don't
have a neurotic organizational need to demand higher prices.  For example,
Personal Edition at $245 is darn near very much what is in Ultimate for the
average individual user.  Even so, Enterprise Edition at $395 is still
subject to frequent complaints from larger organizations that the price is
too low. Sad, but true for all of us taxpayers who end up footing the bill
for such bureaucratic foolishness! :-)

I don't forsee much change in price until we wipe out ESRI and the others.
At that point I suppose we will be able to lower prices without getting too
much pushback from agencies and fat-headed bureaucrats, because there will
be no alternatives. They'll end up buying Manifold even if the price is
lower than they want to pay.  I personally think that the direction should
be lower price, because that is the gateway to selling hundreds of millions
of copies. This is counter-intuitive for people with low confidence in their
product, but if you have confidence you know that GIS is highly
cost-elastic: by lowering the price you sell so many more units that overall
you make more money.  I could be wrong about this, but I think the future of
the GIS industry is lower prices, not higher prices.

But in the meantime, considering the company was designed to make good money
at sub $100 pricing, with the pricing structure we have we are not in any
way limited by cash flow (the understatement of the year). I don't mean to
aggrieve anyone who is parting with their hard-earned cash for Manifold
licenses, because of course good cash flow is useful for being a better
competitor and everyone should be pleased that the income is being used
sensibly. It's not like the cash is being wasted on thick  carpets or plush
corporate aircraft.  Even if you are miffed the company could be selling for
a lower price, take heart that the windfall profit is being invested into
making a better product for you.

The flood of money has made it possible for Manifold to undertake some truly
intense technical initiatives to improve the product and to push out the
envelope of what is considered the baseline for the GIS industry overall.
For example, doing 64-bits throughout a couple of million lines of code is a
huge undertaking. It's not something a financial cripple can do.  Once we
have it, everyone must get it, so our action in this area is pushing the
rest of the industry to catch up.  To take another example, work for some
time has been underway on what is by far our most ambitious technical
undertaking to improve Manifold, an effort so challenging that I don't think
any other company would attempt it.  But we are doing it and had the
confidence to commit to it because of the money pouring in.  I expect we'll
see this begin bearing fruit as soon as 7.50, coming up fairly soon in 2007.

All this is visible (or should be visible) to anyone who has read the
release notes for a steady stream of releases since 4.50.  There have been
nearly 4000 items in about four years and the pace is increasing. Anyone
paying attention to Manifold deliverables can see there has been an obvious
increase in scale of what is accomplished. That's the real consideration
here: how the cash flow gets used.  As long as it is used on the product you
know all is well and our people continue to apply themselves to fierce
competition and to revel in the joy of creating killer GIS product for the
benefit of our users at absurdly low price. 

The thing to worry about is not lack of money, it is the corrosive effects
of too much money if it causes us to go soft in the head and to start doing
things like start sending executives to polish their own images at speaking
engagements, sending people to squat and babble at OGC or GITA, deploying a
government bidding group to sell tiny quantities of overpriced software to
Uncle Sam and all that other non-core, legacy fluff. 

Ken Olsen, the founder of DEC, often remarked that he didn't worry about DEC
when times were tough because then people focused on what really needed to
happen.  He said he worried about DEC when times were flush because then
people got soft and distracted by all sorts of idiocy.  He was right.
People who haven't had the experience think I'm kidding, but I assure you it
is much more difficult to handle too much profit than just enough profit to
keep expanding in a tough-minded way.  But I think we're up to the
challenge. :-)

And, by the way, I think the user community can help manifold.net keep a
focus on the traditional Spartan ways that have made the company so strong.
Resist calls to get the company involved in non-core activities.  Be
demanding for more features at the same or lower price.  Keep our developers
at the forge hammering out better code and the company focused on building
the tools that everyone else can enjoy.  When GIS people get together at
conferences or other activities, let the users be the stars of the show.
What's going on next week at NYS GIS in Lake Placid is a good example of
that: instead of manifold.net deploying a porky set of company marketing
hacks it is the user community itself in that region that is speaking out
about what it is doing with Manifold.  Manifold.net is providing a bit of
assistance in the background with door prizes and sending a small booth, but
it is the users and entrepreneurs in the region who are in the spotlight.
That's the way it should be.

Cheers,

Dimitri