Long sales cycles, even longer implementation cycles and questionable solution value define the enterprise software business. Having worked in this space for almost a decade, I saw it up, close and personal. It was not easy for an engineer to transition to sales – presentations, demos and sales anxiety were big challenges. However, a non-commercial, yet analytical and curious engineering mind questioned the ways of business. An enterprise software company spends hundreds of thousands dollars on a sales cycle with no guarantee of winning the business. Software vendors fly around teams frequently, build expensive proof of concepts and entertain clients, all on their dime. However, the moment a client signs on the dotted line and writes a fat check, the tables turn. Now the client is spending millions of dollars in the hope of realizing value presented in jazzy slides and achieving the streamlined workflow shown in the Proof of Concept. More than half of these implementations either completely fail or run many years and multi-million dollars late achieving a fraction of the value promised. Can such a business survive?
When I bought my Audi, I did my research, paid my tributes to the dealer by spending eight hours haggling, and finally wrote a big check. However, I received the product as specified, albeit four weeks late [the dealer provided a rental car for that duration], and now I am enjoying the great driving pleasure [read value] as promised. A simple transaction where both parties are happy. Yes, car buying can be further simplified by reducing negotiation time and optimizing the delivery process but it still is an efficient process with minimum surprises on both sides. Why doesn’t enterprise software work the same way?
Today, when mankind is obsessed about productivity, innovation and simplification of all things possible, why enterprise software–a $220B a year industry–is not on the list? Software companies should investing more in R&D than lost sales. Clients shouldn’t struggle to find the right solution and labor to get the promised results. It should be a simple and efficient transaction like buying office supplies or utilities. There is some hope in software as a service [SaaS] business model, where clients pay as they use the software and can theoretically turn it off if missing value or a drop in utilization. It is a great step toward simplification but still far from perfect. Any decent size organization ends up customizing hosted software and finds itself in the same rut of enterprise software.
Salesforce.com started only a decade ago. It now has a market cap of $18B and sells at 260 times earnings because it successfully commercialized the SaaS model in an otherwise mature enterprise software space already taken by biggies like Oracle and SAP. However, Salesforce.com can soon become the “Google” of this space if an innovator simplifies the business model to become the “Facebook” of enterprise software.