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Basab Pradhan writes about enterprise technology and services and other things on his mind at his blog 6 AM Pacific.

One response to “The Marginal Cost of Software”

  1. Atle Iversen

    “After all, software has no marginal costs. Every dollar of incremental revenue is a dollar of incremental profit (before taxes)”

    Creating software is a large investment, and every dollar of incremental revenue is NOT incremental profit until all the investments are recovered…so Apple taking a 30% cut is a big deal until you have covered your investment…and then it is “only” a 30% cut of your profit…

    The next unit sold of Angry Birds may not need any extra cost in engineering, but Angry Birds 2.0 (or an update to be compatible with iPad 2.0 etc) may very well require additional engineers…which you only can afford if your profit is high enough….