Blogosphere highlights broken software vendor business models
What a crazy few days in the blogosphere! Economic pressures force clients to become more attuned to the business models of software vendors. Vendors have amped up sales tactics as they face earnings pressures. Fellow colleagues in the analyst/blogger/media world have responded in full force to the observations we see as hurting both the vendors and clients in the software industry. In fact, these recent posts stem from a love of the industry. They serve as warnings that something must change. Nothing resembles spite, just a hope that the industry will shift and respond with a win-win. Vendors please take note as this is not an attack on you, but an out for you to change the business and make a case with your investors. End users will also have to play their role.
Industry luminaries add their insight and wisdom
Michael Hickins kicked it off with his April 15th post on “SAP, Oracle Abusing Customer Relationships”. Says the BNET guru, “Indeed, most customers have a love-hate relationship with their vendors that is heavily weighted towards hate”. Shortly after, Dennis Howlett on April 16th then piled on with a piece about how the spin from the major vendors MISO (i.e. Microsoft, IBM, SAP, Oracle) is out of control. Says Howlett, ” MISO PR wants to massage, control, dumb down or just ignore but when you’ve got fearless analysts… in play what can they realistically do to combat the ever increasing stream of criticism coming their way? The usual answer is to summon up the vendor/analyst/journalist/blogger relationship but that’s starting to wear thin as a veiled threat. There are just too many sources prepared to spill their guts. See more in his post about “Enterprise vendors: in pursuit of reality”.
Thinking that most of the storm had passed, today (4/17/2009), both Industry Guru Michael Krigsman and Star Analyst James Governor brought some fresh and related perspectives. Michael in his piece on “Ugly Enterprise Sales Tactics” took a view that as a client advocate analyst, “… it’s also important to recognize Ray’s bias. Although he’s one of the most knowledgeable, diligent enterprise analysts out there, Ray’s role is to protect his clients, and he does benefit from negative press about vendors”. Rounding out the day James Governor brought his point of view with “Enterprise Software Sales as Corporate Pathology: The World’s Greatest Dog and Pony Show”. He was inspired by his colleague “…in a post about Zend’s new enterprise PHP server Stephen my business partner summed up the tragedy of enterprise software sales so well I thought to myself I really need to reiterate it…” He built on Krigsman’s points and added “Here is the bottom line. We already thought vendor sales tactics were aggressive in a market that was growing for pretty much everyone – so what about now, in a downturn? Frankly things are worse now. Maintenance fees are hiking while customer profits are disappearing. Aggressive tactics are the norm.”
The bottom line -vendors can achieve win-win’s but clients must also do their part
There is good news insight. Harmony among clients and vendors can be found in Jon Collins , Neil Macehiter, Dale Vile, and Neil WardDutton’s book “The Technology Garden: Cultivating Sustainable IT Business Alignment” (Note to Dale Vile at Freeform Dynamics, Limited: please send me a cut for each referral j/k..) Other factors in play include points about Total Account Value. On an April 5th post, we added,”This illustrates the case why the industry needs a frank dialogue to clients about the true cost of ownership; how Total Account Value (TAV) impacts the vendor; and what ramifications exist for recession time software vendor business models.
Clients will play a role. In today’s economic climate, industry leaders need to lead in striking the right balance with customers, or face more “Le Rebellions“. If they over step their push for discounts, they may force greater consolidation, leaving them with fewer choices and potentially higher long term prices. If they fail to receive value from the software, well, they too may go bankrupt.
The software industry should take this as a notice to change or be changed. New business models will emerge to meet end user client needs. Good luck and please heed this with the best of intentions. We all need a win-win.
Software customers would love your comments about vendor sales tactics. Vendor sales reps, chime in with your point of view. You can post here or send me a private email to rwang0 at gmail dot com.
Follow these industry luminaries on twitter as you can be sure there will be more POV’s about what’s next:
(Please note that modifications were made to this blog post between its original post at 2:28 pm and the update at 8:58 pm. I was on a plane and of course had to re-edit!)
Copyright © 2009 R Wang. All rights reserved.