Will 2004 be the real year of the customer?

The lack of must-have software will give customers more power -- ultimately shifting the rules that have traditionally governed the software industry.

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In 1899, Charles Duell, the U.S. commissioner of patents, urged President McKinley to close the patent office because "everything that can be invented has been invented." Some customers have begun to feel the same way about enterprise software. For many IT buyers these days, there is no new technology that seems particularly compelling. Although many software vendors look forward to an economic rebound in IT, the lack of must-have software...

will give customers even more power during the recovery than they had during the recession. This power may even lead to a change in the rules that have traditionally governed the software industry.

During the last decade, many large organizations rolled out some form of enterprise resource planning (ERP), supply chain management (SCM) or customer relationship management (CRM) system. Years later, some are still struggling to implement these systems successfully. Interestingly enough, some of the rules that customers are demanding be changed won't necessarily make software less expensive, but they may require the vendor to assume more risk for failed implementations. An example of this is the hosted model that many companies, including Siebel Systems, are rushing to provide. Under the old license rules, customers bore most of the burdens of failed implementations. Even when implementations were completely unsuccessful, the customer kept the software and the vendor kept the money. Under the subscription model, though, a failed implementation forces the vendor to forgo at least part of its revenue.

The feeling of power is so strong that some customers are refusing to upgrade to new versions, forcing suppliers to continue to support old software. A case in point: Fluor Corp. had so many problems installing an SAP upgrade that it went back to an older version, fired its CIO, and took a $13 million write-off. Nothing unheard of in that. But when SAP announced plans to drop support for the version Fluor was using, Fluor suspended its monthly maintenance payments and threatened legal action. Eventually SAP was forced to back down from its plans to drop the product Fluor was using.

In response to this shift, Siebel Systems is organizing a new consulting practice to help customers not only implement Siebel applications successfully but also manage them better over time.

Yet entrepreneurs and venture capitalists are working energetically to prove that there are still white spaces in enterprise software. The success of social networking technology such as Friendster, for example, has been followed by technology that fills similar needs for enterprises. Just as Friendster provides an automated way for people to introduce themselves to their friends' friends, Spoke Software Inc. provides employees with insight into their co-workers' contacts. Software such as Spoke's enhances the traditional networking process that most job hunters use.

Some observers, including Phillip Windley, a professor at the computer science department of Brigham Young University, even suggest that the biggest impact of employee-networking technology is not as a link among workers at different organizations, but among workers at a single large company. Within a single company, the technology can help an employee identify the right person to delegate work to. It can also help employees navigate the political waters.

So which group is right about the enterprise software space? In the long run, Duell, and all the technologically overwhelmed people like him, will be proved wrong. There are still fortunes to be made helping large enterprises run better -– as almost anyone who has worked for a large enterprise understands all too well. In the short run, the seeming lack of white spaces will force a different take on the way enterprise software is valued and measured.


This was first published in January 2004

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