This summer I've been kicking tires on a way to think about the changing enterprise software market. After some false starts, I started calling it 'adoption is the new lock-in'. It sounds catchy enough - but does it work as a lens to view the market? Well, not as well as I'd hoped. Unfortunately catch phrases rarely get it done.
But the debates I had about it made me think. Let me set it up - and then you can tell me what you make of it.
The 'adoption is the new lock in' thesis statement
When I contacted a few smart peeps for feedback, here's how I put it:
- Vendor lock-in, while still significant even in a SaaS subscription model, is not what it once was
- With less lock-in, vendors need a different way to draw in and keep customers
- Therefore, a thriving ecosystem around a product is more and more important
That ecosystem can be built up by:
- cloud and/or database platforms to develop on
- freely available APIs (and development environments not restricted to partners)
- easy partner onboarding for individuals getting traction with apps
- offering differentiating free content, software, and documentation
Essentially, the 'lock-in' becomes 'lock-in by choice,' driven by either:
a. Robust ecosystem, fueled by open development platform, or
b. Intense user adoption based on exceptional user experience
I cheated a bit and added the second characteristic after I polled a few colleagues, to accommodate certain products that have not excelled in ecosystem/open platforms but have done exceptionally well with user adoption/experience, particularly in the line of business where resistance to new solutions can be fierce. Intense user adoption - especially in the form of paid licenses - is clearly the most valuable buy-in of all.
Put another way: paid licenses for products not in heavy use are increasingly vulnerable. Today's business users are much more empowered to adopt other solutions either in consult with IT or by going 'rogue' with their own mobile apps or SaaS purchases. But: 'community' for its own sake is not enough to qualify here - not without a platform that supports vigorous proliferation of apps and/or code sharing.
Reactions from Esteban Kolksy
From my banter with Kolsky on digital transformation, I knew he'd have no shortage of strongly-worded opinions.
We didn't get far before our first disagreement: Kolsky doesn't see much change in vendor lock-in from today's SaaS offerings:
I have to disagree slightly. Vendors in SaaS worlds manage to do two things well: implement licensing models that reflect the old on-premises model really well - and that makes a decision to a vendor more of a lock-in, not less – whether there is adoption or not, since we have a contract for three years, per user. Training users takes time and patience, and the SaaS solutions that are not based on three-tier cloud are so complex to implement and integrate that it is just a different interface [browser] for the same old application) and as such, vendors manage to retain the lock-in they had in on-premises by replicating the model for SaaS, but hosted in their world.
Can't say I take issue with that - only problem is that Kolsky's invoked a 'true cloud' debate that is a little beyond the scope of this piece, but you can read his thinking on that here. But, the gut response is the 'hosted solutions' Kolsky objects to with every fiber of his analyst soul don't qualify as adoption metric - not without an external development platform.
As for the remaining points, here's his boiled down take:
'Buying into an "thriving ecosystem" around a product is more and more important'
Kolsky: This is totally true, ecosystems are beginning to rule the land – especially for mobile apps (custom-built mobile apps, not those provided by vendors that simply mimic what their desktop applications do).
'The ecosystem can be built up by: cloud and/or database platforms to develop on, freely available APIs, and, especially: offering valuable free content, software, and documentation.'
Kolsky: Regarding development platforms, definitely true: three-tier cloud is essential for this. As for APIs, I hate to use APIs for cloud services but it is the commonly used name – so sure. When it comes to freely available content, yes. You build ecosystems in public, collaborative environments – which is why private cloud is a hoax perpetuated by vendors afraid to compete in an open model like you describe.
Views from upstart vendors
I also asked two vendors who are well versed in platforms, partner enablement and/or developer adoption to chime in.
I heard from Richard Duffy, Vice President, Partner Strategy and Enablement with Acumatica. Here's a few highlights:
Much of what you say rings true with where we're headed. One of the things that is critical, and that we have done with our Acumatica Developer Network, is to make it easy for partners to engage and have access to our software and tools at no charge while they are developing an idea or a solution. When the time comes for them to go to market, they make money from their IP and work and we make money from our IP and work. We’ve even taken this one step further to cater to the individual developer who’s just starting out and who has no money to spend on expensive developer tools and access to platform, and so forth, and they can sign up for ADN (Acumatica Developer Network) and have free access to software and tools.
Duffy also sees the impact of free documentation and content, and that is a work in progress:
The next thing we have to do is ensure that we are providing a robust community with training, documentation, and support. For us, that’s the next step and the primary focus going forward.
Vijay Vijayasankar, currently VP of Global Channels and Business Development at MongoDB, shared a few thoughts with me. MongoDB has well beyond 8,000,000 downloads and 200,000 online education registrations, so they know a thing or two about adoption - and also the distinction between broad (free) adoption and monetization of paid customers.
Vijayasankar frames this in terms of community, not adoption per se. Here's a few bits I edited down from a longer piece he sent me:
- Community makes it safe to adopt MongoDB. There is safety in numbers because online documentation grows and improves the more people embrace MongoDB. There is also safety in having a large talent pool to draw from. Finally, a large community ensures a wealth of third-party add-ons and other supported software.
- Community grows MongoDB's total addressable market. We regularly discover that MongoDB is actively being deployed for mission-critcial projects in small and large organizations long before our sales team ever thought to contact the company.
- Because of #1 and #2, a large community makes it hard to compete with MongoDB.
When it comes to paid customers, MongoDB sounds pretty determined to avoid any negatives aspects of lock-in. But they are also pursuing the kind of voluntary lock-in I am talking about - the kind that comes from standardizing on a platform by choice:
While MongoDB offers paid enterprise subscriptions - with features like enterprise grade security - our entire business model depends on us earning that renewal every year. We don't - and we cannot - look at subscription as lock-in. If we stop adding value to the customer (in product, support, ecosystem, ease of doing business) - we know we won't get those renewals... We are a platform vendor and would of course love to see customers standardize on MongoDB. So in that sense there is a lock in aspect to our story. But we are open source too - so a customer who doesn't want to pay us and can operate without the differentiation of our paid offerings can do so , thereby negating the "evil" nature of lock-in associated with traditional enterprise software.
There isn't any - yet.
For now, I stand by my revised thesis statement that (vigorous) adoption is the new lock-in, with some obvious caveats, starting with the incumbents' advantage. Whether it's on-premise or the SaaS flavor du jour, multi-year contracts are multi-year contracts. Switching out enterprise software is nothing like switching cell phone providers.
Idealizing adoption and customer choice comes at the expense of a reality where software is still pricey, no matter the purchase model. 'Free' products offer valuable sandboxing but for full-fledged installs, do-it-yourself comes with a price tag of its own - 'free' typically brings product support and staffing headaches. As John Appleby once said to me, and I paraphrase, 'Why can’t I buy my enterprise software priced by the transaction, or by the revenue I generate, or by the profit my company makes?' This is the logical conclusion of the cloud model.'
Still, these adoption tactics matter. Vendors that ignore them do so at their peril. At the least, they are heavily impacting how buyers research and select software - something I have already hit on. If the informed buyer can't find you, you aren't winning. Not for much longer. Thoughts?
Image credit: escape © nito - Fotolia.com
Disclosure: Acumatica is a diginomica partner as of this writing.