June 10th, 2009

Even more signs your software vendor can't innovate fast enough

Posted by Dennis Howlett @ 2:06 am

Categories: Enterprise applications

Tags: Software, Vendor, Channel Partner, Research & Development, Financial Accounting, Business Operations, Finance, Dennis Howlett

Forrester analyst Ray Wang has a list of seven

Vinnie Mirchandani adds another seven

Here’s mine:

1. Channel partners find there is little new to offer the market, start to leave their main vendor. Channel partners thrive on new functionality. If it dries up, they’ll look elsewhere.
2. Software vendor imposes new conditions on the channel which are focused on cashflow collections and quotas. Vendors must manage their business model but when you see them managing financial issues before attending to customer need then you know they’re in trouble.
3. Quarterly earnings reports focusing on increased maintenance revenue and/or improved margins made on the back of maintenance rather than an emphasis on R&D spend. A vendor that focused on Wall Street and not Main Street will lose its market - eventually.
4. No clearly defined strategy for providing saas/on-demand offerings. The market is transitioning but many vendors are struggling to work out how to satisfy investors without blowing up the company.
5. You mention that you are interested in Amazon EC2 and your vendor starts talking about security issues. Amazon is disrupting the storage and compute markets by offering services at low cost that challenge traditional data center models. Incumbents using FUD are showing you they are in defensive mode.
6. Your vendor offers software at a starting discount of 65%. Differentiated software has a premium, commodity software should be heavily discounted. Vendors whose opening gambit is a substantial discount are looking to get you on the maintenance treadmill at full list price. The carrot is the discount they are prepared to offer but remember that software acquisition is a small part of the total lifecycle cost.
7. Your software vendors threatens an audit. This is desperation time. Some on premise vendor sales people have struggled to sell anything in the last 9 months. One way they can extract cash but not necessarily deliver value is to check and ensure that everything you have has been properly licensed.