Last week at Infosys Confluence event, I listened to Kent Johnson, a 35-year Boeing veteran who has responsibility for ensuring that the knowledge that is built up over time in constructing an aircraft is not only maintained but kept up to date. This is important because institutional knowledge has to be passed from one generation to another as both an aid to learning but as a record for reference in maintenance. That in turn supports a $5 trillion forward order book and an estimated $1 trillion in maintenance streams. Those are huge numbers.
During our conversation, he shocked me by explaining that the iconic 747 has a lifecycle estimated to run for 100 years. While the aircraft has gone through many iterations, the basics remain the same. Alongside, he told me that in the fiercely competitive world of aircraft manufacture - the big rival is Airbus Industries - Boeing customers demand a 1% year over year reduction in the cost of keeping the planes flying for the life of the aircraft.
While estimates vary, the lifecycle of a 747 appears to run in the 25-30 year range. That means Boeing is on the hook for many years and has to constantly find ways to reduce costs while maintaining margins.
One of the ways it achieves this is by 'auditing' its suppliers. The idea is to ensure that suppliers stay in business but don't make excessive profits. It's a sort of shared risk model.
This got me thinking about enterprise software and in particular accounting/financial software.
Customers have become accustomed to being asked for increases in prices every so often on the basis that new features have been added. I argue that for mature offerings, that is no longer justified and that core functionality should have taken on commodity status. I have no problem with asking for premium prices as they relate to functionality that adds value but I find it hard to justify some of the prices we see for functionality that hasn't changed in 10, 20, 30, 40 years for a solution that has its roots going back close to 700 years.
Cue timeless software as Vishal Sikka, CEO Infosys is wont to say and as if a moment of serendipity arose, this from Sikka's first story on this topic back in 2008:
Sitting in the newly refurbished cabin of a Lufthansa 747, I cannot help but marvel at the continuous evolution of this beautiful plane. First released in the 60s, before I was born, this machine is so fundamentally different now, modern cabin, modern cockpit, new communication systems, navigation systems, engines, and yet it is essentially the same as when it was first born. The same principles of flight, the same reliability, the same optimizations around the essentials of travel requirements, fuel consumption, and maintenance.
Of course Sikka's thinking is much more expansive than my sliver but I believe it is worth opening up this topic for discussion. To that limited extent, I raised this with a number of SAP executives and customers this week. It's a concept that hadn't occurred to any of them. One executive said:
Who does this in the software industry?
The answer of course is no-one. At least none that I know. And that won't change until a vendor is brave enough to realize that in treating software in this fashion, they create new friends among hard pressed customers while opening the door to the innovations they crave. Others will dismiss this as the weird thoughts of someone on the cusp of insanity. But then I see more and more customers questioning the value of what they get from software for which the price never seems to go down.
I will talk more about this in another story.
Disclosure: SAP and Infosys are premier partners at time of writing