That caught your attention. Jeff Nolan who leads SAPs Oracle Attack Group has penned a WIP thinking piece on software costing. Regardless of my personal opinions about SAP as a company in need of angioplasty, and Jeff’s job which is to disrupt Orifice Oracle messaging, it is an extremely brave post. All you guys at Sage Towers – take note. Jeff says:
If you think objectively about pricing trends in enterprise software you can easily come to the conclusion that almost all software should be free or nearly free.
As Jeff’s a representative of SAP I can legitimately call him to account as it relates to SAPs history. Jeff’s hypothesis only works for commodity applications. Accounting sits at the centre of this debate – WinWeb has already staked out that ground. Forget the SME emphasis. Game over.
Enterprise software selling is a nasty and inefficient process that favors the large vendors at the expense of the rest of the market
True – so how do vendors restructure? This was a question I discussed briefly with another Enterprise Irregular. No conclusions yet but I’m working on it.
If you could dramatically lower the cost of sales while horizontally scaling the customer base you could, ideally I admit, transform a hunter/killer sales force into a farming operation where the objective is the upselling of components and maximum penetration of existing accounts. In just such a scenario the sales force becomes an extension of customer support
Right and wrong. If you adopt the SaaS model then support is the sales opportunity – frictionless sales becomes the norm.
There are considerable obstacles to this concept, the most direct being that you are effectively cannibalizing billions of license revenue for the prospect of rewards in the lower margin services business.
Darwin rules – adapt or die.
The other obstacles are tactical, such as how to compensate a sales force and report financial results. Largely solvable but hugely disruptive.
Get used to it and create a set of A grade students instead of the 30% A-C students supporting the D-F sales guys.
Lastly, not all your software should be free, just the what we would call the “core”
Kerrching. Spot on. Damned right. It you offer a competitive differentiator then abso- frigging-lutely. As I said at the beginning. Brave. Now sell it to Leo and Shai.
So here’s the history bit – SAP got rich by giving Accenture a gravy train. It was called BPR. It was an economic virtuous circle. That’s done. But SAP has got numb nuts that still believe history can be re-written. I won’t link to all the examples but you know what I mean 
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so if you replace the word (?) SASS with commodity then some of the cloud clears. Sage is a giant in the world of commodity software, but its model is being attacked by innovation. Question is, can it survive in the brave new world (many seem to think not), or should it shift up a gear and compete in the middle market? I guess history is a poor guide, but what Sage has always been good at is buying up cash cows and milking them – that should be food for thought for the bright young things! And the answer is a no brainer – commodity is the growth market – there is no sign that the dinosaurs are returning.
Don't understand the SAP thing. Sounds like they don't know which market they are in – or is a case of the grass looks greener?
Dennis,
I'd like to see those "numb nuts" links!
Why should "commodities" be free? They still cost money to produce. There is no logic in that argument; just ask sellers of many of the world's most popular commodity products: oil, gold, copper, etc. Commodities find it impossible to attract premium prices, but that's a different argument. And, I don't regard as very "free" anyone who offers me something for no up-front charge on the expectation that (a) I will have heavy switching costs preventing me ditching their product, (b) combined with an expectation they will make up the revenue on services.
Its as sophisticated as a no interest financing charge when you buy a tied asset.
Cheers, Andrew
agree – way too ambitious for SAP. But why think in terms of a revolution – what they need is evolution – small and mid sized price adjustments in a number of areas
see
http://dealarchitect.typepad.com/deal_architect/2…