May 23, 2013

Five Rules for Enterprise Software Buyers

Just Say “No” to Vendor Hegemony

If you’ve been watching the news lately, it should be pretty clear that the enterprise technology business is changing ― and fast.

For one thing, the private equity guys
are stepping in – lured in part by the ongoing revenue streams created
by maintenance contracts, perpetual licenses, the “upgrade handcuffs,”
and other affectations of an industry in which the established vendors
have been able to ride herd over customers for far too long.

But enterprise software leaders are being disrupted by changing consumer preferences up and down the application stack ― Google Apps over Microsoft Office, Dropbox and Google Drive over corporate file systems, Solar Winds over Tivoli, and so on ― and by superior cloud-based offerings in virtually every layer of the enterprise technology stack ― from platform to database to network monitoring and IT management.

Meanwhile, enterprise hardware leaders (like Dell) are being
disrupted by the proliferation of post-PC-era devices like smartphones
and tablets, consumer preference for them, and corporate IT’s grudging
acceptance of them (BYOx).

I’ve written about this topic
― enterprise software sales and procurement practices ― a lot in the
past.  Watching corporate customers continue to kowtow to old-guard
enterprise software vendors ― and put up with antiquated business practices that make no sense ― makes me crazy.  It’s like watching your kid step out in front of a bus.

As the guard continues to change in enterprise technology vendors,
it’s going to be more challenging (and expensive) for customers to
continue to cling to the status quo.  Some of the best new enterprise
technology is coming out of start-ups, working from cloud platforms and
the open-source software stack – both of which are proven and reliable

For most customers, it’s past time to move into the 21st
century.  If you don’t, you risk being left behind holding the bag ― the
bag of money being proffered to vendors with little expectation of
customer control over product performance.

However, if you’re still clinging to the old ways ― or feel that you
need to while you get your senior management team acclimated to the new
world ― here are five rules to protect yourself:

*  Don’t buy something if you don’t know
it works.  Don’t buy slideware!  Seems obvious, but even yours truly
has fallen victim to this, unfortunately.  This is hardest with new
products/start-ups – but it’s a good discipline for both the start-up
and the customer.

*  Don’t pay in perpetuity for something that you may only use for a short period of time.   In particular: Don’t continue to pay maintenance for products you are no longer using!

*  Get the procurement and sales people out of the way. Let the engineers ― on the vendor and customer sides ― be the primary drivers of product evaluation and selection.

*  Make the vendor commit to deploying in production at scale.  Just installing software does not value create.

*  If the vendor does their job, give
them public kudos, especially if it’s an early-stage vendor.  Public
kudos mean a lot to early-stage vendors ― far more than the money you
will pay them ― because they seek validation for their innovation.
You’ll help their cause ― and yours.

If every buyer of enterprise software
would just stick to these five basic rules, many of the enterprise
software leaders ― particularly Oracle ― would go out of business.

Also, check out new services ― such as TrustRadius
― where you can get objective opinions from real users on what works
and what does not.  Services such as this will likely replace firms like
Gartner or Forrester over the next decade. 

To traditional enterprise tech vendors
with outdated business models, bloated engineering organizations, and
outrageous costs of sales, I say: “Be afraid. Be very afraid.”   It’s a
new world.

Andy Palmer is
a serial entrepreneur, investor, and advisor to startups in the Boston
area.  You can find this blog post, as well as additional content on the Koa Lab's blog.  You can also follow Andy on Twitter (@andyhpalmer) by clicking here.