Software // Enterprise Applications
Commentary
5/14/2004
12:25 PM
Bob Evans
Bob Evans
Commentary
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Business Technology: Time To Put 'Lie Until They Buy' To Rest

The 'power to the customer' movement has gained a firm hold, Bob Evans says. Smart business-technology suppliers will recognize the growing optimism will include them if they work with customers.

Last week, this column discussed the rapidly escalating power that customers have seized in their daily and long-term relationships with their technology partners. The particular focus of that discussion was how the movement had gotten to the point where even Microsoft and Sun were willing to collaborate for the benefit of customers, rather than continue the high-profile and low-value hissing matches they've engaged in for so long.

And this week, what to our wondering eyes did appear, but more of the same: IT vendors of all stripes abandoning their long-cherished practice of relegating Customer Value to sixth place in their list or priorities, which with little variation go something like this: (1) Technology Is Complicated and Expensive, (2) Our Stuff Won't Work with Their Stuff, (3) Their Stuff Won't Work with Our Stuff, (4) We Just Dare You to Try to Create Workarounds, and (5) Viable Workarounds Render All Warranties Null and Void. This, folks, is PROGRESS, and it deserves to be celebrated---keep the Big Mo rollin'!!

For example: Here's one of the largest business-technology customers in the world describing his feelings toward global providers of outsourcing services: "Customers are getting tired of paying for this, and they're rebelling," General Motors CIO Ralph Szygenda recently told InformationWeek's Paul McDougall. And by that, Szygenda didn't just mean he was going to stop springing for coffee when the teams get together: "We're probably the only company in the world that can force that movement, but, for good or bad, I'm enforcing standardization of the outsourcing industry." Taking a stance that forceful--and one that could be terribly threatening to an outsourcer with a resistance to change--makes it pretty clear that GM's outsourcing partners and would-be partners are applying massive new amounts of energy and focus to what GM wants. Or as acerbic sales manager Alec Baldwin says to the lackadaisical sales team in the movie "Glengarry Glen Ross" after delivering to them a blistering critique: "Oh, have I got your attention now?"

For a couple more examples, let's take a look at the enterprise software market. SAP has been making a huge effort to win the hearts and minds of small and midsize-sized businesses, which just so happens to be a market that Microsoft also is courting aggressively with its own applications under the Navision and Great Plains brands. In the not-so-old days, such competition--or even proximity of potential competition--would have seen both companies drawing lines in the sand, hoisting up the drawbridges, filling the moats, rattling their sabres, and every other hackneyed impending-battle cliche you can imagine. But today? Rather than erecting massive and unproductive barriers to customer collaboration, SAP and Microsoft have instead looked to the higher-value opportunity of making life easier for their customers. And so, with 40,000 SAP installations running on Windows, the companies are pursuing some joint-development and integration plans designed to make it easier for their shared enterprise customers to run SAP applications with Office. Quite simply, it means "you can better-leverage your investments because you get improved interoperability between the two platforms," SAP CEO Henning Kagermann said at the company's recent global customer conference.

In that same enterprise-software space, the turnarounds in priorities aren't confined to the technical side, either--one of the most significant changes taking root is the shift in how corporate customers pay for enterprise software.

If this shift were limited merely to, say, paying $9 million per quarter instead of $36 million all up-front, well, that would still be progress of a sort. However, the change here is nothing so simple--rather, the move from perpetual licenses as the rule in 98% of all software transactions, to one-quarter or perhaps even one-third of all deals now being subscription (or term) licenses, brings with it an entirely new dynamic between the buyer and the seller. And with that, perhaps the chance to build a more mutually beneficial relationship into the future.

Here's how my colleague John Foley summarized it in a recent cover story called "Power Shift": "This is a good thing for us," says Mike Conlon, the University of Florida's director of data infrastructure. "We didn't put out a big pile of money to get a particular piece of software. And the vendor has a different kind of incentive to be responsive to us--they don't have our money."

Other Voices

Wal-Mart Stores Inc. and Target Corp. on Thursday posted strong quarterly profit growth thanks to spring clothing demand, but Wal-Mart said steep gasoline prices could curb consumer spending. The largest U.S. discount retailers both reported double-digit sales increases for the first fiscal quarter as a strengthening U.S. economy and bigger tax refund checks spurred spending, particularly on clothing and electronics.

-- Reuters, May 13


Foley also offered this perspective from one of the fastest-growing enterprise-software companies in the world: "The intense-pressure approach is a phenomenon Christopher Lochhead, Mercury Interactive's chief marketing officer, calls 'lie until they buy,' a stress-filled process familiar to many CIOs. The bare-knuckles approach has left such a bad taste that fewer than 30% of companies surveyed by IDC believe software-vendor licensing practices are fair. 'We believe the traditional enterprise-software model is dying,' Lochhead says. 'The reason is simple--it doesn't work for customers, and, it turns out, it doesn't work for vendors, either.' "

Perhaps I'm celebrating prematurely--much work remains to be done in all of these cases to turn nice-sounding announcements into tangible business value for customers. But I choose to look at it this way: yes, it's true that IT budgets are no longer growing at steady 12% to 15% increases per year, but the purchasing power of this market is still staggering--our recent story on Szygenda's restructuring of outsourcers' behavior notes that worldwide sales of IT-outsourcing services will grow almost 10% this year to $152 billion, according to Schwab Soundview Capital Markets. Or as Cisco CEO John Chambers told a standing-room crowd last week at the NetWorld + Interop show regarding IT spending, particularly in the enterprise and commercial sectors: "Clearly, something fundamental has changed over the last three months....[CEOs seem to have] taken their foot off the [spending] brake." In addition, in a conference call discussing Cisco's third-quarter results last week, Chambers predicted further quarter-over-quarter growth and said he "continues to be more optimistic than I was going into the last quarter." The source of that optimism--and the source of newly won and hard-earned leverage with Cisco and every other business-technology vendor in the market--are his company's customers, who themselves "are becoming more optimistic, and starting to spend."

Optimism. Remember what that felt like? It seems to be making a comeback, and smart business-technology suppliers are recognizing that the optimism will extend to them if and only if they push their own problems into the background and escort the customer, finally, front and center.


To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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