One Reason Why Software Is Expensive

Joel Spolsky recently spoke at Y Combinator about selling software to corporate customers. He said that in most companies software costing up to about $1000 could be bought by individual managers without any additional approvals. Above that threshold, software purchases generally had to be approved by a committee. But babysitting this process was so expensive for software vendors that it didn't make sense to charge less than $50,000. Which means if you're making something you might otherwise have charged $5000 for, you have to sell it for $50,000 instead.

The purpose of the committee is presumably to ensure that the company doesn't waste money. And yet the result is that the company pays 10 times as much.

- Paul Graham in 'The Other Half of "Artists Ship"'