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April 29, 2009 at 9:32am
Below is the contents of an internal salesforce.com memo CEO Marc Benioff shared with Vinnie Mirchandani (and posted on his blog: deal architect). I'm pasting it here for simplicity's sake and because of the power of the message itself.
"For ten years, we've been driven by a simple vision: The End of Software. Now it's time to take on a new challenge: The End of Maintenance.
Let me tell you about a customer that I met on our Cloudforce tour. This customer currently uses Siebel software to run her call center. She pays more than $15 million a year for the privilege of having to implement the updates that Siebel sends her. That does not include backup. Or disaster recovery. And of course, it does not guarantee that she will be using the latest technology. The maintenance agreement only assures her that her outdated software will continue to work. She is paying tolls on a road to nowhere.
We can help her, and many other customers, and deliver much more for a fraction of what they currently pay in maintenance. It's time to open up a new front in "The End of Software"– one that is long overdue.
It's time for The End of Maintenance.
Every year, companies spend billions on maintenance fees and get relatively little in return. Maintenance fees cover updates that are mostly patches and fixes, but they stop far short of the kind of innovation every that enterprise needs to survive. Companies pay to keep the past working and they end up doubling down on technology that can never keep up with their needs. The fees that companies pay have actually been rising, from something like 17% a few years ago to numbers more like 22% today. Every four or five years, companies are paying for their software all over again.
It's time to set these businesses free and make them successful in the Sales Cloud, Service Cloud and on our Force.com platform.
Our new mission begins at a critical time in the economy, when companies are questioning conventional wisdom as they never have before. That, of course, extends to their IT budgets as well. The CIO is in a tough spot right now. Corporate budgets are tightening. And our rivals in the legacy client-server world are using this opportunities to extract more money from their customers by raising maintenance fees. I call this phenomenon "the compression of IT" and it resonates with just about every CIO I speak with these days.
We have a better vision. We sell our customers a service and every customer is able to use the latest. Innovations are included. Upgrades are automatic and invisible. Customers' intellectual property of customizations and extensions is rigorously preserved, and carried forward without disruption.
The service gets better, not just less buggy. That's not what people are getting for all those fees that supposedly buy them "maintenance."
It's time to set these…
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April 28, 2009 at 9:32am
According to this article from Wired, Apple is involved in some very interesting copyright violation cases related to their fairplay copy protection scheme and DMCA takedown notices they provided to folks discussing how to circumvent Apple technologies.
I would pay attention to what the US Copyright Office decides based on their review – and on the results of the lawsuit itself. While I still strongly believe that US intellectual property right laws are able to handle new technologies… I've become a little concerned about how the courts have been reacting to various claims (as well as legislative moves like the DMCA).
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April 27, 2009 at 1:22pm
It appears Oracle has increased its due diligence in the area of auditing customers. On the one hand, this exercise may be helpful (as Oracle will profess) in enabling customers to better understand holistically precisely what their entitlements are and to what degree those entitlements are being leveraged. This is useful information that many customers often struggle to reconcile on their own, and could shed some light on where opportunities for downsizing of entitlements might occur.
On the other hand, customers should be cautious. In a down economy, where the volume of deals and overall license spending is lower than desired, auditing is a means by which Oracle may be hoping to find opportunities for incremental licensing events. Especially for customers who either may not have been positioned to actively keep track of utilization trends over time, or who may not be familiar with original agreements and the parameters of utilization in these agreements, Oracle will be seeking to capitalize wherever possible to bring your license entitlements and utilization back into compliance.
Resolving compliance issues is likely to be done through a new licensing event. Unlike a situation where a customer may be giving Oracle an opportunity to earn additional licensing business via a purchase that is not the result of an existing contractual obligation to Oracle, it is more challenging to negotiate a favorable license arrangement to address compliance matters. In fact, with certain product families, it is likely that the costs associated with the need to add incremental licenses has already been identified. With other product families, Oracle is likely to use its standard list pricing as a starting point, and given that the absence of the licenses constitutes a breach of contract in a compliance situation, they are not under as much pressure to discount. This puts the customer at a disadvantage, not only as it relates to the new license cost, but the associated maintenance costs related with those new licenses too – as the maintenance and support services costs are generally based on the net license value.
Customers would be well advised to invest time in assessing their license entitlements and utilization, and truly ensuring the parameters of their licenses are well accounted for, in advance of Oracle aggressively pursing completion of an audit. If misalignment is identified, and you find that you will require additional licenses to ensure your utilization needs are met into the foreseeable future, it is better to address that with Oracle proactively with bringing a new license opportunity to them. Given the possible stakes, this may be an area where enlisting professional help may be a worthwhile investment to either a) ensure you have no exposure; or b) help you address any potential exposure in a way that is most optimal for your organization.
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April 24, 2009 at 9:32pm
Our good friend Stephen Guth of The Vendor Management Office has been on hiatus recently, studying to take (and probably ace) yet another bar exam. For those of you who have never tried one, I don't recommend it. Usually 2+ days long, 6-8 hours per day. One half is typically a 200+ multiple-choice question exam called the Multi-State Bar Exam. The other half is typically essays, based on the substantive state laws of whatever state bar you're trying to pass. Recently graduated law students typically spend about a month in bar-prep courses prior to the exam – trying desperately to learn the substantive law of their chosen state (you don't have to go to school where you want to pass the exam – so most schools don't "teach to the test").
It's grueling work – and if you're like Stephen – having already passed in one venue and then doing it all over again in another many years after law school, it's even more difficult – you simply have forgotten much of what you learned that's outside your practice area. So Stephen's disappearance is highly warranted – between work, studying and his personal life, I'm surprised he's still breathing… or sane. Which might account for this random post that just appeared on his site.
Stephen: if you're out there and listening – hang in there buddy! You're gonna' nail that exam.
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April 24, 2009 at 9:32am
I found an interesting site that covers the trial and tribulations of customer service representatives – stories from the frontlines. A few even relate to negotiation (and one on contracts), so I thought I would share:
The Lesser of Two Evils
Reorientation Disorientation
They Start So Young
Why Our Contracts Are a Gazillion Pages Long
Have a great weekend!
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