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Defrag - How Your Enterprise Software Vendor is Ripping You Off
Michael Ducy discusses how enterprise software vendors mislead customers. He outlines several "confidence games" including the SKU shuffle where vendors add unnecessary product editions, innovation through acquisition where startups are acquired but products are not improved, and lack of community where customers cannot interact with each other for support. Vendors also use misleading code words like "license migration" to disguise price increases or changes in contract terms.
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Defrag - How Your Enterprise Software Vendor is Ripping You Off
- 1. How Your EnterpriseSoftware Vendor is Ripping You Off Michael Ducy Senior Cloud Consultant – enStratus @mfdii
- 2. How Your EnterpriseSoftware Vendor is Ripping You Off (except mine) Michael Ducy Senior Cloud Consultant – enStratus @mfdii
- 3. About Me • Chicago, The Ohio State • Linux Engineer • Operations • Software Pre-Sales
- 4. The Confidence Games •The SKU Shuffle • Innovation Through Acquisition • Can’t Touch This • Lack of a Community
- 6. Code word: LicenseMigration
- 8. Code word: NewLicense
- 13. Code word: NewLicense
- 19. • http://melindascashsource.wordpress.com/ • http://freezbees.blogspot.com/2012/09/mc-hammer-u-cant-touch-this-lyrics.html • http://bestdayeverhawaii.wordpress.com/2012/04/19/hawaii-name-change-procedure-and-frequently-asked-questions- about-changing-your-name-after-marriage/ • http://www.fotopedia.com/items/bindalfrodo-x4dqGAzxPxI • http://www.bighappyfunhouse.com/archives/09/07/index.html • http://searunner.sv-timemachine.net/2006/08/jeff%E2%80%99s-wedding-aug-22-26/ • http://frank.itlab.us/photo_essays/wrapper.php?sep_26_2009_F1.html • http://tasmanianrealestatetrouble.blogspot.com/2010/12/future.html
Editor's Notes
- #2 How Your Enterprise Software Vendor is Ripping You Off
- #3 This is the suggested title after I shared my presentation idea to a friend.
- #4 Bio
- #5 These are some of the games enterprise vendors play.
- #6 The first Confidence Game that many vendors play is SKU shifting. Essentially they end of life SKUs or licensing method, They then create a new set of SKUs to sell the exact same product. When the customer goes to buy more of the old SKUs, they may be allowed to, or more often they will be redirected to the new SKU. Well of course the customer isn’t licensed for these new SKUs so then we need to talk about performing a “license migration”.
- #7 Of course this License Migration is nothing but repurchasing the exact same product under a new licensing scheme. Maybe the product is now licensed by the number of CPU sockets where as before it was per actual OS instance.
- #8 Innovation through acquisition. This one is very common. Many large tech companies acquire new lines of software to expand their portfolio or to find a new line of business to expand their top line revenue. They have the sales staff and infrastructure in place to support the sales organization in marketing this new product. It makes sense to add one more brush into the bag of the sales person to hoc door to door.The problem arises when the acquisition displaces an existing product the vendor has. This replacement thus deprecates the old product and existing customers are left holding the bag. Often the new product is brought in as a “new product” (SKU) and thus any existing customer will have to “migrate” to the new product.
- #9 Thus, you’ve been paying maintenance all these years and all of a sudden the rug get pulled out from under you.
- #10 But this highlights a bigger problem in enterprise software. A lack of true R&D and guiding of the industry trends. Enterprise software companies are laggards when it comes to accepting new technology trends.
- #11 I am sure we have all seen this adoption curve. Since enterprise software vendors are laggards, or to the right of the curve it follows that if you marry yourself to an enterprise vendor you are almost guaranteed to marry yourself to the right of the adoption curve.
- #12 In the end this ends up costing your business real money.
- #13 The next game I’ve seen I call “U Can’t Touch This”. This basically is where vendors charge you for a license depending on who is touching the software/server. Imagine an organization that has a portion of their infrastructure outsourced. This organization makes a decision that all of the organization will use a certain product for monitoring. They install the software on all of their servers, including the out sourced portion. No lets say there is a problem with that out sourced infrastructure and the enterprise wants to show this to the outsourcer. Legally, the organization is violating the license agreement by allowing the outsourcer to touch the software, and many license agreements disallow third party use of the software.Translate this now to the Cloud Computing.
- #14 In the end, the organization needs to purchase a brand new license. In these first 3 games, it is important to highlight something. Most software companies are judged based on the “new license revenue” they bring in each quarter. Each one of these licensing games is booked as new license revenue for the company, even though they are just selling the same software over again to a customer.
- #15 Lack of a community is another big issue facing enterprise software. While over the years, this has improved, there is still tremendous work to be done in this area. Often times, documentation is hidden, downloads are hard to obtain, and being able to ask questions from peers is often lacking.
- #16 I once had a CTO of a large software company tell me, “This is enterprise software; we don’t want our customers to download our software and install it on their own.” In many ways, enterprise software vendors treat you like this dog here. They want you begging for what they have.
- #17 But this lack of community also creates another problem. When the technology is hidden behind walls, how do you develop expertise in the industry so your customers actually have a bench of people to pull from? Some vendors are really good about building this bench of talent. Vmware is a great example of a company that has built programs to train and develop a talent pool for their customers to pull from.
- #18 Do the vendors want you to develop the expertise? In many cases, I would say no. Services are a major component of many software organizations with margins on order of 30-40%. While some software organizations may not to carry services on their books, other organizations live and breathe carrying a strong services organization.
- #19 So what does the future hold? More openness. OpenStack is a great example or rejecting the norms of Software vendors. So much so you find CloudStack looking at emulating OpenStackmore and more.Rejection of the legacy vendors. I’ve had several customers tell me that the big 4 are not being invited to the party when evaluating newer technologies such as Cloud and Configuration Automation.