Is Software a Dead Baby?

The enterprise software industry is in the midst of a new revolution. The stakeholders are re-thinking their role and relevance in the industry. Let's review the three key stakeholders of this industry.

Most, if not all, customers are really angry and pissed off with the current state of their software. After years of spending money and broken promises, the users are finally fed up. The current enterprise software is difficult to use, rigid in its applicability, and costs too much to install, use, and maintain. While the Web 2.0 revolution is reaching its peak, the enterprise software is trying to define what Web 2.0 means for enterprise software. Most of the companies I have talked to told me that they are tired, angry, and frustrated. This problem is even worse in the supply chain management space. Promises made in the past are not being realized, inventory levels are still high, customer service levels continue to be under pressure, and most importantly costs continue to rise. Many companies still rely on spreadsheets to get things done.

Large software vendors are busy buying each other and continue to ignore the real customer problems. What happened to SAP's business by design initiative that was a result of years of work and investment of several hundred million dollars? On the other hand, smaller software vendors are busy either trying to sell to larger companies or trying to justify their existence to a reluctant and risk-averse venture capital community. They too are not really focusing on solving the customer's key pain points.

The system integrators and other service vendors are worried about internal utilization metrics or cooking up their books rather than trying to focus on customer issues. Moreover, their incentive structure is totally screwed up. The attitude is summed up by the now infamous quote "I only get paid for the number of hours I work for you, so let me see how I can justify more hours to complete this project."

So, what is the net result of all this? Customers are getting more and more frustrated. Recently, one prospect of my company quoted a famous movie line while describing his frustration with the existing enterprise software. He said "I'm as mad as hell, and I'm not going to take this anymore!"
It is more frustrating since it has been realized by many that the enterprise software industry can't get any worse. So, the good news is that it is all uphill and downhill from here. There is a handful of companies that are explicitly frustrated with the current state of affairs and are building truly innovative and next generation applications. True SaaS companies - not the ones that are merely relabeled as SaaS companies - have built highly flexible, easy to use, and low cost applications that offer customers a simple alternative. Use it and then pay for it if you really use it. Few years ago many customers were still skeptical about this on-premise/off-premise issue, but now I know of many companies that have decided not to buy any longer any of the on-premise solutions and have resolved to use only SaaS applications. To quote Mark Benioff, CEO of Salesforce, "Software is Dead baby…"

The biggest challenge that the entrepreneur faces today is erosion of self-confidence. Clearly entrepreneurship is not for the faint hearted. Look around you; many, if not all, enterprise software companies are at the end of their lifecycle. They have grown (in arrogance not in size per se) to the point of being ineffective. Most will be extinct in a few years. This is a great time to start a new company or go and follow your passion. You will need a few years, any way, to get going and by the time you are getting strong, all others will be at the verge of extinction.

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