"Last Mile" applications

Ray Wang, one of the analysts at Forrester I respect because he speaks his mind on the over-priced maintenance of large software vendors, writes at Sandhill.com about growing ISV ecosystems around the major vendors

"Consequently, major software vendors like IBM, Microsoft, Oracle, and SAP are encouraging their partners to innovate on their platforms, fill existing gaps, and ultimately help drive long-term customer loyalty. The result: each of these large software vendors now has a vast partner ecosystem filled with solutions at varying levels of integration, support, and quality."

He lays out a useful framework on how to decide between one of the partners in the ecosystem or waiting for the "parent" to itself develop that capability.

Four observations:

a) For many industries, the partner applications are  not "the last mile" - they represent core processing capability. As I wrote recently about Oracle's Insurance offering, most big vendors have not delivered vertical functionality for most non-manufacturing industries. So, another decision point is whose ecosystem? If I was a hospital CIO I would let my clinical application's ecosystem drive my financial or HR application choices, not the other way around.

b) While the bigger vendors boast thousands of partners in their ecosystems (Ray has some stats in his analysis), they often represent agreements signed eons ago and atrophied partnering practices. More contemporary developments and business practices are likely to come out of ecosystems like Apple's rapidly growing App Store around the iPhone (ironically, the bigger software vendors cannot wait to be showcased in that ecosystem) or Zoho's recently announced marketplace

c) You may be better off buying comparable functionality from a non-ecosystem vendor - the smaller vendor will likely give you better pricing (the core vendors often skim 25 to 40% of revenues from the partner) and far better support. While most CIOs groan at the thought of more integration, the reality is the cost of integrating a non-ecosystem vendor will typically be lower than the lock-in TCO of an ecosystem partner.

d) Don't forget to hammer the core vendor for not delivering that ecosystem functionality that your maintenance dollars of prior years were supposed to have already funded.

Comments

[R "Ray" Wang]

Vinnie's point on ecosystems are dead on. Just keeping track of partnerships and which partnerships are productive is full time work. What customers will want is better transparency on the progress of these relationships, input and visibility into product roadmaps, and an understanding of how IP is assigned, shared, or protected.

[Chris Young]

Vinnie,
A fifth observation...the opportunity to leverage the last mile solutions other companies have developed (within their ERP vendor's community) provides companies to close gaps at a low cost, with no interface, and no additional license or maintenance fees. My business, B2BSX, is a custom development exchange, focused on SAP, where companies buy and sell custom last mile solutions. I am interested in your perspective.

Regards,
Chris Young
Principal and Co-founder, B2BSX
937-242-7567