I read this Wall Street Journal article “You airline wants to get to know you” on a Delta flight this week. Ironically, in the worn seat pocket I found a vestige of its 2000 ad campaign “How do you want to fly?” It was a clever campaign where passengers wrote on a baggage tag their personal expectations from Delta. They filled in the blank after the word Fly - so Fly with bigger pillows or Fly and arrive early.
9 years later, I found myself changing planes in Atlanta – something my personal tag had told Delta I disliked. 9 years later, my fare from New York to Tampa was $ 99 - an occasional customer-friendly aspect of its yield management system. Another of my tags had told Delta I abhorred the yo-yo pricing. 9 years later, I was flying a plane which should have long been retired – one of my other tags had asked Delta to move to a shorter amortization cycle (higher amortization being offset by lower maintenance on a younger fleet)
In other words, little had changed.
And it hit me the majors in the enterprise software industry had become like the major airlines. They were sticking to their broken hub-and spoke – on-premise – models. They continued to milk yield management – their 90% maintenance margin model. They continued to fly older planes – investing little in innovation R&D.
And their customers were grumbling more publicly. See this comment by “SuperSean” on Oracle. “As a large IT buyer, every time I have to deal with Oracle I end up feeling dirty at the end of it.” It gets worse from there. See this comment on Infor “…the idea of actually servicing customers and running a software company is not why they got into this game.” Much more in that comment.
I could point to similar comments about IBM, SAP, HP, Microsoft. You should hear what I hear in conversations. The term “thugs”, “Mafia” are increasingly common.
But many customers like me got tired of bitching and moved on. In those 9 years I had moved almost all my domestic travel to Southwest which now offered from my home airport over 30 cities non-stop, gave me far more predictable (and reasonable) fares and flew a far (significantly so) younger fleet. And as I talk to colleagues in other cities they tell me JetBlue from New York, Airtran from Atlanta, Frontier from Denver have similarly picked up much of their domestic travel budgets.
So the enterprise software market is becoming similarly fragmented. You have the older vendors who make all the right marketing noises and then ignore their customers. And you have younger vendors like salesforce which are doing things very differently.
So in this airline state of mind, I sent Marc Benioff (who I had met on this trip to New York) some unsolicited advice. I urged him, as he planned for salesforce.com's second billion in revenues, to look for inspiration not in the software majors, but in Southwest.
In other words, like Southwest he should pick up the tags from the floor and read them and deliver on.
Those tags which the majors asked us to fill, but did little with…
The mess(ier) world of software accounting
Jason Corsello points to a change in services accounting at the SaaS vendor Taleo.
Dennis Howlett cries foul "Can you imagine a vendor willing to accept settlement for implementation services on the same terms as its online service contract period? It’s not going to happen because the disruption to cash flow would be too great. And what happens when a company decides to switch via a get out clause? Using the same logic, the vendor would be entitled to view the contract as terminated and accelerate deferred revenue."
Phil Wainewright rants "..it is irksome to discover that (auditors) are doing so by picking on industries that they patently don’t understand one iota, rather than doing a better job of policing those industries they understand all too well."
To me, revenue recognition has long been broken from many aspects - two of which I have written before
" It is interesting that the SEC does not apply the same rigor to capitalization of software costs by buyers. I doubt it has filed any high profile cases compared to a whole bunch against vendors for issues in revenue recognition. Capitalization policies are not consistent across buyers."
"In software negotiations, recognition issues cloud the fact that software pricing is way above where the market suggests it should be. I have seen several vendors hold the line on their maintenance percentage - "our accountants will not allow us" - but then turn around and give higher license discounts, and maintenance is tied to the lowered license fees and discounted that way. When those discounts approach 90% of list, talk about rigorous revenue recognition is well - as they say in Texas, cheap."
Like Dennis, I need to add "unlike Phil, I used to be a practicing accountant. But what do I know?"
The problem is today's practicing accountants who should know are too busy cleaning up their messes at Satyam and a bunch of banks.
March 25, 2009 in Industry Commentary | Permalink | Comments (1) | TrackBack (0)