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The Retaliatory Tactics of Mega-Vendors

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I was recently commissioned to write a whitepaper by Concorde Solutions.

The executive summary is as follows:

“The IT Industry is facing four major disruptive trends:

  1. The Migration to Cloud environments
  2. Consumer-led Demand
  3. Austerity and Transparency
  4. The Retaliatory Tactics of Mega-Vendors

The paper looks at each of these trends in turn and then discusses how Software Asset Management (SAM) professionals can address the key issues and leverage these opportunities to their advantage.”

You can grab a full copy of the whitepaper here (Registration with Concorde Required).

The following article is an excerpt from the whitepaper.

The Retaliatory Tactics of Mega-Vendors

Desperate times, desperate measures

Desperate times, desperate measures

Firstly, what do we mean by a mega-vendor?

A Mega-Vendor is defined as a software company who has one or more of the following characteristics:

  • Is public listed and under great pressure to demonstrate share holder value – whatever the cost
  • Is acquisitive to make up for their lack of in-house innovation and agility
  • Is being attacked by younger, innovative, nimble companies who eat away at their valuable maintenance contracts
  • Shareholder value takes precedent over customer satisfaction leading to hostile customer relationships

New players are entering the enterprise software market and restricting the reach of the mega-vendors. For example Salesforce.com has limited the spread of traditional vendors such as SAP and Oracle. Therefore the typical land-and-expand saturation of a particular account whereby the customer might have stated, “We are an Oracle house” is happening less often.

Mega-vendors tend to develop a nasty habit called a ‘compliance revenue team’ tasked with rinsing customers of cash due to licensing violations. A layman looking at the enterprise software market for the first time might wonder why mega-vendors don’t invest in making their licensing easier with self-policing mechanisms and simpler licensing programs. Surely customer satisfaction and retention should come before short-term revenue? The truth is, mega-vendors find it very difficult to wean themselves from their nasty habit, collecting lucrative compliance revenue every quarter.

In the most dramatic example of their bad habit, a mega-vendor will have an international team of compliance business managers driving revenue with marketing campaigns, sales targets and disruptive tactics to claw in the revenue. After all, in an age of austerity with cheaper competitors pinching their business how else are they going to satisfy shareholders? Desperate times mean desperate measures. Compliance revenue is an easy market to target and the cost of effort is much less than driving new sales against more agile, innovative competitors with an ingrained customer driven culture. It is too lucrative to switch off.

Mega-Vendors like to pain a friendly gloss over their nasty compliance habit. The table below provides a quick guide to common terminology and marketing spin currently being used in the industry.

Translating Mega-vendor Compliance Language

Mega-Vendor Terminology Purpose Translation
‘SAM Team’ A marketing frontage to the license compliance revenue team Compliance revenue team
‘SAM Business Manager’ or ‘SAM Engagement Manager’ Friendly faces programmed to flush out revenue from customers under the guise of ‘best practice’. Auditor
SAM Partner Manager Find business partners that can help the mega-vendor flush out revenue from customers. Compliance revenue business development.
Customer Satisfaction Make sure customers are happy so they remain customers. This is an alien concept to Mega-Vendors. How does customer satisfaction aid share holder value?
Licensing Agility Manager Ensure licensing programs best fit our customers and are as easy as possible to understand and deploy. Are you kidding?  Definitely an alien concept to mega-vendors who prefer Fear, Uncertainty and Doubt to aid revenue flushing.
SAM Review, SAM Assessment, SAM Maturity Assessment, Cloud Readiness Assessment Audit the customer to flush out revenue. Dress it up how you like. It is an audit.

Mega-vendors often prey on and exploit weaknesses in corporate processes. Two typical tactics to support this ludicrous behaviour from mega-vendors are:

  1. Promoting technology or contractual lock-in with high barriers to transfer preventing customer choice
  2. Over supply. Encouraging the customer to ‘eat as much as you like’

Unlike ‘eat as much as you like’ in the restaurant industry whereby you face a predictable bill, customers eating from the ‘eat as much as you like’ menu in the software industry commonly face miscellaneous surprises and the goal-posts moving after they have eaten.

The trouble with eating whatever you like is that your organization becomes more relaxed about corporate controls, which means it is difficult to quantify value and usage. This creates an illusion of value but leaves the organization numb to real requirements. For more information on software publishers driving up perceived needs see this article “Gartner: Use Market Forces to Drive Licensing Negotiations

All this ludicrous behaviour smacks of desperation. Not very customer friendly is it? I can’t see it happening forever in the software industry but in the meantime be careful not to get caught in the death spiral of mega-vendors.

This article is an excerpt from a whitepaper I wrote for Concorde Solutions, grab a copy of the whitepaper here (Registration with Concorde Required).

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Martin Thompson

Martin is an independent software industry analyst, SAM consultant and founder of The ITAM Review and The ITSM Review. Learn more about him here and connect with him on Twitter or LinkedIn.

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