Software // Enterprise Applications
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4/26/2002
03:27 PM
Stephanie Stahl
Stephanie Stahl
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Editor's Note: Pendulum Swings From Sellers To Customers

It was one of those "how did you get here from there" kinds of conversations. I was chatting with an executive of a midsize software company, who, throughout his multidecade career, started and sold a few businesses before he ended up where he was then. He was lamenting the difficulties in making it big in the software business (keep in mind this was prior to the dot-com craze and before the economy started snoozing). It was difficult to get press; it was difficult to get the analysts to pay attention to him unless he was paying them for service; it was difficult to get early testers of the software to agree to have their names on a public-customer list until they decided to make purchases. He'd often find himself giving away his software just to get some momentum going.

That's really no different than some of the wheeling and dealing that's long been the norm among the bigger companies that go to great lengths to win a competitive bid, I suppose. But by and large, big software companies have had the upper hand when it comes to licensing terms, software prices, and other parameters of what used to be multimillion-dollar, multiyear deals (or big honking deals, as one of my colleagues around here would say).

But the game has changed. Customers are demanding--and getting--lower prices, shorter licensing terms, renegotiated contracts, and better support. Indeed, the economic downturn and tighter IT spending have shifted the balance of power away from the software vendors and into the hands of the buyers. More important, this shift will likely be as near to permanent as things get in this industry. In the words of one CIO in our cover story (p. 22), "Gone are the days when we throw your software out there, and we know it sucks, you know it sucks, and the support stinks. We won't tolerate that." 'Nuff said.

In this week's issue, we also bring to your attention another power shift--in IT compensation. Gone are the days when marginally skilled employees could demand lucrative salaries and perks. It's also difficult for highly skilled workers to get even modest increases. Employers are holding the line, freezing salaries, trimming paychecks, cutting stock options, and more. With the economy being what it is, that might not be surprising. What's significant is the fact that this is the first decline in total compensation in the five years we've been tracking salaries and likely the first in a decade. For more on our survey of more than 10,000 IT professionals, see "Big Bucks Dry Up".

Stephanie Stahl
Editor
sstahl@cmp.com

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