I love America. Love it with a passion, not just as a citizen, but as a journalist. Nothing beats free speech, and no other country encourages the free exchange of information like the U.S. For that, I wake up every day thankful and joyous, like a child on Christmas morning. I give this preamble because there is one thing that I love almost as much as a big scoop or catching a politician in a big fat lie, and that is getting feedback from readers.
My most recent column, "Forget the Whales--Save Software," got some colorful responses, both online and off. I didn't think my perspective on the fledging software industry would spark such strong feedback, most of which challenged my opinions and even my reputation as a journalist, but it did. But even negative responses offer valuable views of the IT industry and, equally important, the readers of VARBusiness. So I decided to tackle a few of the letters responding to "Save Software." Let's meet the readers:
From "Adam": "Talk about a myopic view of the IT industry!! The first point about the decline in vendor participation at Trade Shows like COMDEX is not as a result of software's failures, but the [expletive who run the trade shows selling space to anyone and everyone with money. I've been attending COMDEX for many years (missed this years though) and have witnessed it degrade to something PT Barnum would have sold to suckers. The second point about e-business software being a total failure is generalization at its finest. This is journalism? Just because a company's stock price went for a wild ride doesn't mean it isn't successful. Can you recall IBM's stock price of $45 in the late 1980's? People were talking about them going out of business? Where are those analysts and writers today? They're all cheering IBM's services and software initiatives as revolutionary and visionary leadership, etc. Third, people buy based on urgency. If there's no urgency for the software, that doesn't mean it's not worthwhile, just the timing is off. This leads us to the forth point about the ASP industry disappearing. Just because people haven't bought into it all or because the infrastructure isn't fully developed to take advantage of it doesn't mean it's a bad idea or won't work. In fact, I'll put Microsoft's brains up against yours and any analyst for the direction of software. Remember long ago when the PC first came out and people asked, "Great, but why do I need to input all my recipes into a machine? It takes me longer to enter them than to just look them up". The fact is in every revolution there are leaders and followers. If Microsoft and Apple hadn't taken the lead on the PC marketplace you wouldn't likely have a job today (nor would I for that matter). Now PC's are not thought of as a luxury, but rather as a necessity. The concept of .Net while confusing to all is the new rallying cry for Microsoft. Your question about why would they move away from their bread and butter shows how little you understand business. How do you take a multi-billion dollar company and continue its growth? It takes vision and strategy. I don't work for Microsoft by the way, just admire the way they can take thousands of employees and VARs and focus them on a purpose."
I actually spoke to Adam after reading this and had an enlightening, insult-free conversation with him. It's true, he doesn't work for Microsoft. Here's the e-mail I sent to him after reading his comments on Talk Back (I urge all readers to leave their e-mail address, it's a great way to meet people and share information on the IT industry):
Dear "Adam": Thanks for your feedback and your interest in VARBusiness. I found your comments to be insightful and, best of all, spirited. However, I feel I must engage in a counterpoint and clear up a few areas concerning my column.
First, I don't blame the software industry for its fading status. Like you said, the trade shows are a joke. It's not the fault of a good start-up software firm if they can't get anybody to their booths at Comdex because they don't have laser lights, booth babes or free garbage to throw at people. Secondly, I didn't write that I believe e-business software is a failure, just that many people do. I think this is true, if you consider the opinions of investors, solution providers and, most importantly, customers. The recent research that more than half of all CRM installations don't live up to customer expectations is troubling, to say the least, and recalls the failure rate of e-marketplaces and e-procurement projects a year ago.
And while the implosion of companies like Ariba, Commerce One and i2 shouldn't soil the industry as a whole, I know for a fact that many smaller and up and coming software players have been bottlenecked by the failures of larger players, even if those failures are small in number. People, especially customers, see those high-profile disasters and get scared. Again, this column is about the perception of software in the market. I make the point more than once that there are great software products out there today but that people aren't giving them a chance. Speaking of perception, if you've read my other columns, then you know how much I hate the stock market. It's based on rumors, inside trading and loose perceptions, rather than solid facts. It's a joke, in short. A company's stock price couldn't matter less to me, so I don't hold that against a software player.
As for the ASP industry, I didn't write that software hosting was a bad idea. In fact, I think it's a great idea, but only a few guys have been able to execute the model because, I believe, too many pretenders jumped on the bandwagon and the industry grew too quickly without the infrastructure or the customer interest to support it. The ASP model, in a sense, was ahead of its time, but I still think it's a great model.
And last, Microsoft. I didn't write that .Net was a bad idea. I think the products are interesting and Web services is an intriguing advancement of the industry. But I'm still not sure how Microsoft plans to apply it to the customer. I think the vision of Web services is promising, but not the way the strategy is being executed and marketed by Microsoft, especially to partners. I can't understand why Microsoft has alienated its channel partners so much with expensive, restrictive new licensing models, forced certification upgrades, dropping Java and, most of all, channel conflict with Microsoft Consulting Services. Microsoft needs to embrace its partners to sell .Net to customers and get .Net deployed on a large scale. I don't see that happening, at least not yet. Like I said, I may be wrong, but this is what I've been living and breathing non-stop for the last six months and it's all very disturbing for the software industry.
From "DJR": "Mr. Wright's article only shows that he knows less about this industry than he does about baseball and basketball. This is a very fine example of uneducated journalism. The only thing I can say "dear readers" is that Mr. Wright's credibility with this reader is zero."
Dear "DRJ": Thanks for your interest in my column. However, if your response actually had a point instead of insults, we both may have learned something. I'm still struggling to figure out how an opinion piece based on facts gives me zero credibility as a journalist. Maybe my predictions give me zero credibility as an IT analyst, bone roller, soothsayer or even a sports fan, but not as a reporter. Why don't you write back sometime after you've really thought this column over and tell me why I'm wrong about the software industry? Then we might get somewhere. While you're at it, I'll raise the stakes; answer the following sports trivia questions and we'll see how much you know:
Who was the first player in North American professional sports to have his or her number retired?
Who was the last player to lead the NBA in both assists and scoring in the same season?
Who was the first player ever to win the Rookie of the Year award for Major League Baseball?
From "Michael Ortner": "I think your experiences say more about the tradeshow industry than the software industry. Marketers are realizing that tradeshows are too expensive and are placing their bets elsewhere, such as the Internet. The annual market for software is $200 billion, over half of which is bought by businesses. Annual growth rates have been in the 15 percent range with the exception of last year and probably this year when growth rates in the 5 percent range are more likely. And as far as number of software vendors succeeding, you mentioned 7 of the largest and alluded to the idea that there may be a few others. I just counted 16 who had over a billion in revenue in the past year and over 40 who have a market cap over a billion. Not bad for an industry about to disappear."
Dear "Michael Ortner": Thanks for your in-depth, researched response. You make an excellent point with those numbers and you're absolutely right about the software companies with a market cap of more than $1 billion. Here's my concern--$1 billion ain't what it used to be, even when we're talking about solid revenue. To me, the hallowed level of financial success for software firms is $2 billion in annual revenue. It's like Hollywood. Ten years ago, a movie was termed a blockbuster if it made $100 million. Now, because of the outrageous costs of making films and the saturation of the market, even a film that makes $200 million isn't always a considered success. At this stage, less than 10 software companies have vaulted over the $2 billion mark. And if we're talking about valuation, there are even deeper concerns. For instance, Ariba's valuation is more than $1.8 billion, yet the company, which was supposed to be a B2B software star, racked up a net loss of $2.68 billion for fiscal 2001 while only drawing approximately $408 million. In addition, the executive ranks of the company changed almost as much as the lineup of Destiny's Child. Software companies as big as Ariba, therefore, can be easily assimilated or eliminated by larger entities. This doesn't bode well for guys under $100 billion in revenue, even if they have groundbreaking technology. There just isn't enough interest from customers and VARs in new software companies trying to establish themselves as major players. VARs are of the utmost importance--if you can't get a solution provider to work with your technology, you won't win much business.
From "Dollie Kinkead": "We are a very small, woman-owned company who has two great Internet based document management solutions. Both are proven at Fortune 100 companies. We have tried to get our software reviewed by professional reviewers like Forrester, etc. The replies are always the same: We're too busy, try contacting us later. Okay, we go the trade show route. We go to the conference, which is the heart of our target audience: The Technical Communicators Annual Conference. Lured by the promoters that over 3,000 were going to attend, we fork out the money and make the trip. About 300 visit our booth, with less than 1% of those being decision makers. Although we have the way to contact these people later, no sales were made from this expenditure. As a small company we cannot continue to make this kind of investment without any proven results. As you stated, decision makers aren't trying to learn anything new. Selling to the government is also a trip. We lost a bid to another company. The buyer never saw a demo of any of the software programs they were considering. Your tax dollars hard at work. There is decent priced, proven software out there. How do you get the message out?"
I also talked to Dollie (because she left her e-mail address). If you think her comments sound grim, talk to her for 20 minutes and you'll think my view of the software industry is sweeter than Will Wonka's chocolate factory. Her letter deserves a special response, one that's less about me responding to Dollie and more about telling her an interesting story, which illustrates my opinions of the state of the software industry.
Dollie runs a small, family-owned business called Micromedia, which specializes in document management solutions and services. Based in Berryville, Va., Micromedia focuses much of its attention on the government market with its two flagship products, InfoMaxx, a knowledge management system, and DocuMaxx, a document management solution. Trouble is, as Dollie stated in her letter, government bidding and contracting is seriously screwed up. Yes, the feds are still buying a lot of IT today, but how can a small vendor stand a chance if the government doesn't even test the products and simply goes with brand names? Even though the feds don't test the stuff, the bidding process tends to drag on under the weight of bureaucracy and cost companies valuable time. In addition, Dollie says government agencies are over-spending on big businesses and dishing out the crumbs to smaller players
"$165,000 on software you've never even seen?" Dollie says in reference to the government bid mentioned in her letter. "That's unbelievable. That would never happen in the corporate world."
Speaking of corporate America, Micromedia built a document conversion solution for Xerox's GlobalView documents for a customer project involving a rather gigantic bank. You would think following the success of the project, Xerox would establish a partnership with Micromedia and team up for more solutions. Think again.
"The bottom fell out with Xerox, and now they won't even talk to third-party partners," Dollie says. "Vendors are just looking for ways to reduce costs by cutting our partners, make all the money themselves and shove their products down your throat."
At this stage, Micromedia is working hard and fast to form partnerships with VARs to increase business, which is a major challenge even for a company with proven, low-cost products.
"There doesn't seem to be a lot of resellers looking for new vendors in this economy, so it's tough," Dollie says.
There have been some prospects, she says, although not all are promising.
"Compaq just approached me last week looking for document management solutions, so there's that," she says.
Compaq? In regard to my views in "Save Software," I rest my case.