Lora CecereInfluencer

Founder and CEO of Supply Chain Insights

Following

Undeniable Truths of Software

Dec 29, 2014

Software is a strange business. It is full of lots of ups-and-downs... higher highs and lower lows than other business models. When software companies are on the upward swing, employees have the best times of their lives. When the pendulum swings back, and the downturns happen, it gets bad quickly.

Let me give you an example. At one of the software companies where I worked, I experienced 12 workforce downsizings in three years. As you watch friend after friend leave the office building holding a cardboard box, you become numb. The first time it happens you feel the numbing pain; but over time, it becomes an unfortunate, and painful, way of life leading to a dysfunctional organization.

In my current role, I am an analyst. For the past 12 years, I have followed trends in the software industry. Prior to being an analyst, I spent 13 years in the software industry marketing and building software. Here are seven undeniable truths of software which I share from my experience:

1. Fast Cadence. The cadence of life in the software industry is faster than those of the company's clients. Technology shifts and software release schedules move at a quick cadence. Employees making a transition from industry roles should get ready to increase their pace.

2. Platform Rewrites Are an Inflection Point. Few license-based software companies survive a major platform rewrite. It was the demise of companies like Manugistics and JD Edwards. The only company that I have seen successfully navigate the platform shift was SAP with Netweaver ten years ago. The jury is still out on client acceptance of SAP Hana. So, if your software company announces a major platform rewrite... become wary. This has a higher probability of defining the decline of the technology company than paving the way for success.

2. Software as a Service (SaaS) Is More Effective Than Hosting. In interviews with customers, SaaS deployment customers are more satisfied than those that chose hosting. While these deployment options sound similar, they are not. Hosting is fraught with maintenance upgrade and customization issues. Consequently, when given a choice, select SaaS over hosting.

3. Partnerships Add Little Value. Partnerships abound in software, but I have a hard time finding ones that have added value. While they are launched with great fanfare, seldom do they add value. As a result, do not buy a solution based on a partnership.

4. Consultants have not been Successful Selling Software. In 2013-2014, many consulting partners like Accenture, Bristolcone, Infosys, IBM, and WIPRO engaged in building and selling software; but to no avail, success did not follow. Consulting models and software business models are very different, and consultants lack an understanding of what it takes to make a software company successful. Avoid buying software from a consultant.

5. Consulting Leaders Have Not Been Effective at Managing Software Companies. I have seen many consulting leaders try to manage a software company, but I can count no successes. So, if a software company that you depend on announces the selection of a consulting leader to run the new company, be suspicious.

6. The Only Winner in a Software Acquisition Are the Equity Owners. While the press releases position each software acquisition as wonderful and accretive, this is seldom the case. I have found that the only winners in software acquisition are equity owners of the company being purchased. So, if your software company is purchased, take steps to protect your software assets.

7. Lower Risk Than Custom Code. While the software industry is fraught with issues, there is lower risk with the purchase of software than building custom code. The value proposition and the costs are high. As a result, it is important to have an educated buyer.