Web sites vs. beer – guess who wins?

24 09 2009

It’s time for an update.  Vacations and a flurry of event activity has gobbled up most of my time recently.  And that’s a good thing!  Further pricing discussion will wait another few days while I write about the launch of a new idea that’s been hatching over the past few months.

SAP for Utilities 2009

This is a top-notch event.  This year I was lucky enough to be involved in the mechanics of a new extension of the event itself – a new, utility-centric collaboration and social networking community.  The event’s theme was “Collaboration Fuels Innovation”.  More specifically – cross-company collaboration. Nobody has to reinvent the wheel or solve the same problem twice if they work on common problems.

The event itself draws a very high level audience.  At the event itself, CxO’s, chief architects, and anyone involved in creating the next generation (pun intended) utility company all rub shoulders and share stories.

Utility companies (generation, transmission and distribution, retailers, and operators of all types) show up to talk about their plans for working with new demands in the marketplace as well as any new governmental mandates.

Our objective was to keep those conversations going beyond the event.  So, we created the UtilityCollaboration community.  The idea was first envisioned by the event organizer, Eventure Events.  I just helped figure out how to do it with them.

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Software maintenance: what have you done for users lately?

9 04 2009

I have several friends on both the vendor and customer side of the enterprise software fence.  The vendors always rely on a blend of license revenue and maintenance fees to pay the bills.  Sure, they do some service (consulting, installation, etc.), but the ratio of license revenue to maintenance revenue is the yardstick by which the health of a software vendor is measured.

In today’s economic times, I’ve heard many of their customers talk about going on a “maintenance holiday” (a “version staycation”?) in order to cut costs.  After all, many software applications and infrastructures that are in place today aren’t going to get upgraded in the coming 12, 24, or 36 months unless there is a mission-critical feature added or addressed in a vendor’s product.

To prevent this, some vendors have put in place a measure of protection.  Sometimes these show up as maintenance-lapse penalties which are more of the “stick” side of the balanced “carrot and stick” equation.  This usually results in user grumbling.

A user-mandated, semi-collaborative approach comes from SAP’s base.  In response to its users, SAP has created a practice to measure the value of their maintenance contract with customers in order to justify the expense.  It will be interesting to see how that story develops.

But there may be a more proactive way to go.

Vendor revitalization strategy: remain relevant

As the SAP example suggests, the rules are changing in more places that just the economy these days.  We’ve watched the government provide stimulus packages to revitalize the economy, but for most of us, the benefits will be fairly intangible.  I believe vendors have the ability to make a tangible difference to their users by creating a stimulus package of their own.

Vendors should adopt the three R’s: be responsive, relevant, and required for success.

Clearly the best way to do this, if you’re a vendor, is release something so compelling that customers will flock to it.  But not all vendors have the next-generation iPhone or Palm Pre up their sleeve.

Another approach is to adjust licensing policies to encourage wider adoption of a product or further “adhesion” to the platform. Continued customer reliance on a software platform is like an insurance policy against being “ripped and replaced” (a disruptive act for everyone), or “congestive software failure” (where your product just atrophies in place and is consumed by something else).

You can see evidence of this from Microsoft as they court developers away from the LAMP stack (open source tools).  Over the past few years, they have released very capable, free editions of Visual Studio, SQL Server, and a mashup tool (Popfly) for free.  Most recently they have released SharePoint Designer for free in concert with their open sourced ASP.NET MVC Framework.  This is all to stimulate their developer base and get people in the community to use their tools to make new components like Silverlight into compelling offerings.

Create a hero, be a hero

Out there in user land, the prospects are bleak.  Layoffs and belt tightening may also mean that a vendor’s champions inside a company will disappear.  Once that happens, the vendor’s product could “go legacy” and be the next target for consolidation and “standardization” (i.e., migrate to your competitor’s product).

Vendors should realize that any team leader within a customer worth their salt will be in a protectionary mode.  It’s a fight for survival.  They will be trying to demonstrate the value of their team to avoid being part of the next wave of cost-cutting measures.

So, vendors, listen up: if users can find a way to replace or prevent the acquisition of a vendor’s software product in exchange for saving their team from layoffs, you can bet that software licenses and maintenance fees will be the first to fall.  I’ll post on that later.

This is why I’m calling on vendors to invest in becoming the ally of their customers and users.

The buyer persona of a company isn’t enough to address. Vendors that want their maintenance fees paid or their software upgrades installed must take an active role in making their users succeed as well.  Keep those users as your champions and your software will remain relevant.

Vendor stimulus packages

Vendors have ultimate flexibility in this situation.  By working out creative licensing terms or enabling a feature that the customer or user has been trying to justify purchasing, vendors can maintain an active, positive presence at a customer and become part of their economic success story.

Another approach is the help users use your existing product for something that is new and valuable to them.  I don’t mean go build it for them, but pony up the training, webinars, or prescriptive whitepapers and architectures to help their teams build the thing that will be valuable enough to save their jobs AND assure your place in their hearts (and wallets).

It could be true that there are some vendors that are “too entrenched to fail.” But, user and buyer morale is still important to maintain lest that software product become “too entrenched to upgrade.” 

Look for competitive vendors to examine fallow customer bases and create programs to migrate customers away from existing platforms.  In some cases, software that’s difficult to upgrade represents an equal opportunity for replacement to a user.  If a responsive vendor courts a customer and portrays equal or greater value plus a “low switching cost” to the customer, some established players may not be so established anymore.

Economic necessity is the mother of user innovation.  We will see creative uses of products that become “good enough” to replace or postpone purpose-built products.  Let’s talk about that in another post later on.

For now, be responsive, relevant, and required in your customers’ recovery plan.