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Archive for the ‘Microsoft’ tag

Sunk Costs and Software Development

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On this weeks episode of gdgt weekly (iTunes), Peter Rojas and Ryan Block discussed the new Android based phone.  For those of you who aren’t familiar, Android is Google’s new cellphone OS.  It is hailed as an open platform with very little restriction on developers and users.  I haven’t used the phone so I can’t provide any input on usability or comparability to other phones.

On gdgt they claimed that Android is better than Windows Mobile.  They brought up the fact that Windows Mobile has been around for awhile (currently on ver. 6.1) and this is Android’s first release.  They seemed pretty shocked/impressed that a the newcomer can outdo the old timer.  Personally, I don’t find this all that shocking.  If anything, I think it makes some sense that the first version software can be better than the seasoned veteran.

Google’s advantage comes from the sunk costs in a project.  The sunk costs are what you have put into a project that should be irrelevant when making future decisions.  Since they are already in the project and can’t be recovered there is no reason to consider them in future decisions.  The problem is that sunk costs often lead to commitment bias.  This bias causes a someone to stick with something because they have already put in time and money.  An example is putting a lot of money in a stock that then starts to lose value.  If you fall victim to the commitment bias then you will feel the need to stick with the stock because you have already “come this far”.

A commitment bias isn’t always caused by money.  It can develop because of the amount of time invested or even from irrational feelings.  This can manifest in software and OS development.  A team will spend a lot of time and money developing a UI.  Over time, the original idea may not be the best approach.  To fix it up, the team decides to do little fixes and enhancements.  The idea is they have already put in so much energy that minor fixes is all it needs.  Sometimes a better idea would be to scrap the design and start over.  The longer they stick with it, the harder it is to just start over.  This will eventually put the software at a competitive disadvantage as the competition implements a better UI.

Those developing a ver. 1.0 has less of a commitment bias because there will be less sunk costs.  They can test out different ideas with less guilt if they change directions.  They can also evaluate the competition more effectively.  If they see something wrong in the competition’s UI, they can leave it out early on instead of having to make drastic changes later.

It isn’t that shocking that a version 1.0 software can beat out a 6.0 or 7.0.  In fact, we have seen it at least twice over the past two years with both Google’s Android and Apple’s iPhone.  The question now is whether Microsoft will pull away from previous biases and sunk costs to create something that will push the platform forward.

Written by Shawn

September 28th, 2008 at 9:56 am