Margins in software vs. hardware or services

July 8, 2007

 I found this table on the web, pretty interesting:

 

Btw, Software is the industry with the highest gross margins amongst all industries.

Posted by Jeremy Fain
Filed in Business intelligence, Business strategy, Dell, Economics, Finance, MNC, Microsoft, Organization, Software, entrepreneurship, operations
6 Comments »

6 Responses to “Margins in software vs. hardware or services”

  1. Jeff Kee Says:

    July 9, 2007 at 01:06

    “Software is the industry with the highest gross margins amongst all industries.”

    I guess with the piracy issues, that’s the only way to satisfy their shareholders in terms of profit targets eh?

  2. ilias Says:

    July 9, 2007 at 07:12

    c certainement stupide, mais a la 3eme ligne, 3 colonne, i think it should be 60 to 20, unless the previous row is wrong ;)

    Toutefois, je trouve que les marges devraient etre superieur pour les services, je pense aux cabinets de consulting et autres firmes comptables par exemple.

    L’exemple de l’outsourcing indien n,est pas forcement pertinent a mon sens car il se concentre sur des taches a faible valeur ajoutée. Je m’entends, c’est relatif et temporaire, je sais que Deloitte outsource une partie de ses processus comptable en Inde, donc on s’entend que c’est pas general. Pas de mauvaise comprehension svp ;)

  3. Jeremy Fain Says:

    July 9, 2007 at 10:25

    Ilias,

    Could you maybe rewrite your comment in English?

    The bulk of the people reading this blog doesn’t speak French.

    Thanks,
    Jeremy

  4. Vincent van Wylick Says:

    July 9, 2007 at 10:50

    Interesting. That graph doesn’t reflect the shift of software to services though, and same for hardware. Would it be a safe bet that as software shifts to software-service, margins are going to fall in the long-run?

    Sales & marketing costs would increase, R&D would increase, though both R&D and S&M (how aptly named) would benefit from developing long-term relationships with their customers. I can elaborate if that seems unclear.

  5. Jeremy Fain Says:

    July 9, 2007 at 23:10

    Vince, which shift from software to services? I don’t understand your point at all. If you’re talking of web apps here, then web apps (like Google, Yahoo!, Salesforce, etc.) are PURE SOFTWARE, no service behind it. They’re called services for business model reasons: instead of licenses, you just pay as you go.

    The chart thinks of services as human services, not software services.

  6. Jeff Kee Says:

    July 10, 2007 at 01:35

    “Instead of licenses, you just pay as you go”

    Or you don’t pay at all!!! And I love it. :)


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