I recently received an email from an accounting firm in Sydney which began with the following sentence:
One of our clients is looking at using your software. He is currently using BGL and processing the data and we undertake the audit function. I have had a look on your website regarding your product and am interested in the functionality of the software.
As the journey of launching Mclowd has progressed I have gradually come to understand the profound micro and macroeconomic implications of crowdsourcing.
As a cloud-based, crowdsourced ‘organisation’ Mclowd is progressively replicating the intellectual property in the SMSF accounting space and giving it away in order to drive demand into a services marketplace for the global funds management industry.
This project is being undertaken for less than 1% of the capital that has historically been deployed by incumbents such as BGL, Class and their peers.
These economics are a reflection of the fact that the software is being built by a small subset of the ‘Crowd’ – millions of people around the world with an infinite combination of skills that morphs into the shape of the problem to which they have been attached (often by entrepreneurs such as myself).
Seamlessly migrating from one ‘Task’ to another they solve problems at a cost that could never be achieved by traditional organisational models.
But what fascinates me is the broader micro and macroeconomic implications of crowdsourcing.
If Mclowd can compromise the revenue models and balance sheets of numerous incumbent vendors in a small patch of the global software industry, what is to stop others from doing the same (just as Wikipedia leveraged crowdsourcing to displace Encyclopedia Britannica).
Its difficult to see how vendors will be able to ‘rent’ their intellectual property in future if their clients can simply post a project on Elance or oDesk and end up owning the same IP (the cost of such an exercise would be a tiny fraction of the NPV of the future licence fees that would otherwise have been payable).
IN EFFECT SOFTWARE VENDORS (AMONGST OTHERS) ARE NOW COMPETING WITH THEIR OWN CLIENTS.
But large chunks of the global economy (particularly in developed countries) are based on the assumption that IP in its various forms can be rented ad infinitum. (3D printing is another example of this disintermediation).
If and when this assumption proves to be invalid the impact on equity markets (both private and public) would be non-linear, with significant macro-economic consequences.
Ironically this macro weakness would only serve to reinforce the trend towards crowdsourcing, as more and more clients seek lower cost ways of getting work done, just as the trend to offshoring has accelerated in post-mining boom Australia.