Robert Jurkowski
CEO, Intacct
Customers are beginning to manage their IT operations as a business, expecting the technology and software they buy to help them achieve new growth and improve profitability. They want faster implementations to accelerate the return on their investments. Instead of heavy upfront licensing fees, they try to streamline IT expenses to fit business goals. Infrequent, disruptive upgrades are no longer acceptable. And in today's competitive environment, both small and large companies want the ability to scale on demand--both in size and complexity.
As a result, software makers need to do more than merge or jockey for position if they want to acquire new customers. To thrive and achieve organic growth, the industry needs to stop and listen to the voice of the customer, especially now when the slow recovery in the software sector keeps customers in control.
Here’s how the software industry can adapt:
• Deliver software to support the dynamic business environment that your customers operate in. Companies are living organisms, continually facing new market conditions. They look to business applications to enable that agility. Too often, applications can lag changes in the business, and hinder rather than support business growth. Internet companies, such as eBay and Amazon.com, have given business leaders, as well as consumers, a taste for ease and responsiveness in business transactions. Software customers are no longer willing to wait one or two years to upgrade their systems. Instead they need the benefits of new technology today to retain an edge in the market.
• Service needs to be more than an 800-number. All too often in the past, software companies simply sold products, and then resurfaced only to sell new software. Today, the industry needs to provide a continuum of service to help customers get value out of applications everyday. The days when vendors could sell software from a fast-moving truck are over.
• Be willing to share the risks and rewards with customers and consider tying your revenue to your customers’ results. Software vendors need to be accountable for delivering value, not product. Business customers can’t afford disruptive deployments that put their operations and profits at risk.
• Since software essentially is an assortment of building blocks for running a business, make it simple for your customer to build a solution, using the products and vendors of their choice. Customers want freedom and flexibility, so work within an ecosystem of partners that can provide a wide range building blocks.
• Be open to changing business models, which are likely to emerge over the next few years. Subscription pricing is one model gaining momentum in the market today and shows the promise of being a win-win for both vendors and customers. According to research firm IDC, the subscription model, also called "software as a service" or "pay as you go," is expected to grow 17 percent a year and reach $10.7 billion in 2009. This approach is likely to exist alongside traditional software licensing for many years to come.
Salesforce.com owes its success to the subscription model and is now in a tight race with Oracle and SAP for market leadership in CRM software. This model is appealing to both small and large enterprises. For SMBs it eliminates the need for expensive infrastructure and delivers value quickly. For large corporation it lowers the cost of transitioning from a legacy system.
From the software vendor’s viewpoint, the subscription model is able to deliver a sustainable, predictable revenue stream.
Software companies need to adapt to new ways of selling, deploying and supporting applications in order to help customers succeed in an on-demand world. If it manages to change--both the industry and its customers will be winners.
Robert J. Jurkowski has spent more than 20 years in the software industry. He is currently the CEO of Intacct, an ERP software-as-a-service provider.
