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Enterprise software: The last dot-com victim?

CNET's Charles Cooper writes that with many enterprise software companies treating neglected customers as if it's still 1999, payback is only a matter of time.

True story.

As part of an agreement to resell customer relationship management applications made by Siebel Systems, J.D. Edwards regularly shared the names of its prospective sales leads. But all the while, Siebel was secretly sending out its own salesmen to pitch the same prospects. A retelling of the tale earlier this week by J.D. Edwards CEO Bob Dutkowsky elicited knowing laughter from a Silicon Valley audience acutely familiar with the art of the double cross.

For the record, Siebel maintains that a falloff in customer satisfaction caused the unraveling of a bad relationship. Whatever the actual truth, the tale also bore witness to another reality about the enterprise software business: These remain cutthroat times and whenever there's spare change up for grabs, alliances turn out not to be worth the paper they are written on.

By any measure, the enterprise software business has had a rough time of it. The optimists originally pegged 2002 as a year of slow, modest improvement, and predicted further improvement in 2003. They were, putting it kindly, full of it. Now they say things will pick up once the Iraq crisis gets resolved in the next 90 days.

That's the least of their problems. Enterprise software makers may want to believe business will return to normal when the geopolitical storm clouds clear but they're only kidding themselves. The truth is that neglected customers are undergoing a sea change in reaction to their shoddy treatment.

It took long enough.

During the pre-Y2K buildup, companies overlooked buggy software, shabby support and the dismissive arrogance of suppliers because the overriding objective was to buy, buy, buy. I should add this was a buying spree caused in no small part by a scare campaign orchestrated by salesmen with a self-interest in stoking as much panic as possible.

But in this post-frenzy era, CFOs are regularly holding folks accountable on a project-by-project basis. That means IT managers no longer have the gumption--let alone free rein--to take big chances spending a fortune on iffy software implementations.

Are enterprise software makers in tune with this shift in customer thinking? They say yes, but anecdotal conversations with customers suggests otherwise.

Are enterprise software makers in tune with this shift in customer thinking? They say yes, but anecdotal conversations with customers suggest otherwise. There remains no short supply of bad manners and broken promises. The absence of real follow-up support and the annoying persistence of bugs continue to create grief for users.

ASPs redux?
All this offers a second chance for application service providers. The ASP strategy, where applications get sold as a service or online capability to customers who don't want to install them themselves, had its 15 minutes of fame during the dot-com days. But it is slowly getting a fresh look from IT departments under relentless pressure to stretch shrinking budgets.

Proponents say this is how customers can keep a lid on ballooning costs while keeping current with new technologies. Skeptics counter that it's folly to trust unproven upstarts that may go bust and anyway, software is--and always will be--a competitive advantage in the enterprise.

The bottom line: Years after ASPs burst on the scene, the computer industry remains as schizophrenic as ever about whether this is the future of software--or just another dumb idea.

So--as a former U.S. president was wont to say--let me say this about that.

If ASPs do stage a Lazarus-like revival, the established software powers will have only themselves to blame. I don't know whether software is destined to become a commodity, but this much is without contestation: Customers won't let themselves get abused forever. With enterprise software companies demanding large upfront payments as well as a percentage of the total contract cost for maintenance, service and upgrades, IT departments are balking. Do you really think they won't listen to somebody offering a more cost-effective alternative--especially when they are getting shortchanged on service?

I recently spoke with one software big shot, who described the state of IT business as one that showed "functional adequacy but enterprise incompetence." His point was that for all their high-cost transaction systems and data, businesses still find themselves depending on a rigid set of automation tools that don't help the enterprise or the chief information officer all that much.

I don't call that a competitive advantage as much as an expensive boondoggle.