(Authors Note: I'd like to thank David Bank and the people at the Wall Street Journal for sending me the URL to a version of his article that's available to non-WSJ-subscribers. I've modified the link accordingly.)
“The Revolt of the Corporate Consumer” article by David Bank appears in today’s Wall Street Journal. Subtitled “How companies are squeezing tech suppliers to get a bigger bang for their software bucks”, the article does a nice job of reviewing the combining factors today that are changing the software market landscape. Mr. Bank hits on a number of factors affecting the software community, but I think it’s interesting to look at these in light of how the development community is responding.
Demanding Standards
I thought this entry was interesting in Bank’s article, but he blends this portion of the article with the fact that “customers are using their new clout to force vendors to deliver software that is more secure and reliable.” In the production scheduling area I’m involved in, we do not see strong push toward using standardized integration, however we are taking a lead role in providing these types of integrations – I believe this is only a matter of time as the market matures.
I think Bank’s comments on security and reliability really connect with the basic ideas behind recent approaches in the development community. For example, test-driven development is an approach aimed at providing a more stable and confident release pattern using a repeatable process with a full complement of tools. While TDD provides a number of other benefits on the development front, when viewed from the customers’ perspective it simply makes good business sense.
The security front is a different story right now, with this being a hot-topic across the industry. We are beginning to see security “sniffer” tools being released from companies like Compuware to introduce a regimented approach to the problem. Security is a different ballgame as developers are constantly playing catch-up to the “black-hat” hacker community. However the application space faces a slightly different set of intrusion priorities than an OS vendor faces. I think it’ll be interesting to see how tools will adapt to each concern.
Cutting Maintenance Costs
Banks discusses the fact that customers are dissatisfied with both cost and complexity of software. Both factors impact maintenance costs with annual maintenance contracts typically priced between 15% and 25% of the initial software license and the setup and maintenance burden imposed by installation. Customers are pushing back against large up-front license fees and software companies are developing models where customers pay for what they need.
On one front, development approaches such as “service oriented architecture” and standards surrounding XML Web Services are giving solution providers the ability to develop standards based integration and the opportunity to host data storage and configuration offsite even when relatively tight integrations with existing systems are needed. While reducing the clients maintenance burden, this separation also allows for usage monitoring and billing opportunities that are far more difficult in a remote-installed application.The “soa” mantra also forces (when used properly) a simpler integration pattern. By forcing the application provider to express integration points in terms of simple, knowable and describable transactions happening largely within one call forces development and corresponding documentation to focus on simplicity. As with any tool, the goal can be missed with a poor implementation, but SOA does not promote (in terms of operation, scalability, bandwidth, etc.) the types of integrations used with in-process/stateful objects typical of earlier systems.
Sharing the burden
In this section, Bank discusses the demand for “shared responsibility” that he characterizes for demands that include easier patch management, more secure-code and fewer bugs. While Banks already discussed secure code and fewer bugs, Bank infers the point that customers are demanding a more responsive development environment. I believe the biggest response to this point has been the daily build cycle and a correspondingly active QA process. Maintaining a constantly released piece of code forces the developers to focus not only on features, but on getting the code installable from day one. This idea has been around the industry for many years – I was first introduced to the concept in Jim McCarthy’s book nearly 10 years ago, but this approach is getting far more traction today than it has in recent years and build automation tools are making there way into development tool offerings (such as Microsoft Build).
Deep Discounts
Bank discusses the fact that in the Oracle/PeopleSoft battle, court documents revealed that both companies were routinely discounting their software prices 70-90%. While he discusses the significance of open-source software in this role, I didn't feel that he made a solid case for it as having a casual relationship to the “Deep Discount” issue. I think the more interesting angle is in the ERP market itself – when is someone going to pull a “Microsoft” on this market. What I mean by this is offer the product at a 10th the listed price and even make the product available to support people in non-operational situations virtually free. For example, give the IT people who need to tie into the systems access to the software before the purchase and the corresponding tools and you provide another door into companies that sale reps cannot create or reach. It sends a message to companies that you are confident in your product offering and willing to work hand-in-hand with your staff to be successful. I wonder if Microsoft will see the light, or simply try to play ball with everyone else in the ERP market.
Demanding Results
I find this section to be the most compelling and dead-on. Software companies must focus on getting benefits and results to the customer. This may go beyond the realm of the software itself and software companies need to realize that the software installation is merely a starting point in proving worth. To be completely fair, I believe there are many companies purchasing software that cast a weary eye and rightly so. The “maintenance contract” is usually viewed as something that benefits the vendor instead of the customer. Battling that perception while providing a hands-on approach to customers is not a simple battle, but one that will be necessary for software vendors to succeed.
I like Bank’s quote of Mike Lawrie of Siebel Systems who said “It’s not just about making the best software, it’s also about helping companies get to that business outcome and get the value from the investment they’ve made.”
Summary
I enjoyed Bank’s article and it’s very worthwhile reading. Living in the software-space it’s unsettling when you look at the number of forces conspiring to take down the software gravy-train that’s been in place for a number of years. That said, even a fool knows it had to end sometime. The important thing to remember is that changes and improvements to software methodology need to be viewed with a constant eye toward the customer. Each developer needs to make their own processes better not only to make the software and it’s corresponding processes better but for the sake of staying in business and growing market share.