Invigorate Your Company in 2005

I have known "MR" for many of my years in this business and he has always kept his finger on the pulse of shifts. What do you think of his survey results?

From M.R. Rangaswami, Sand Hill Group
CEO Outlook 2005 shows many longstanding habits of software vendors may be changing - for the better. Here’s a checklist to be sure your company is keeping up with the competition.
Feb 07, 05
I’ve been part of the software industry for more than twenty years. Technologies have come and gone, but one thing hasn’t changed: software vendors’ reputation as unresponsive and inflexible.

In the past, software vendors got caught up trying to capitalize on the “next big thing.” Customers would scramble to be a part of it. Revenues would skyrocket. And capturing a piece of the gigantic pie meant being able to forget about serving customers and managing the business: Customer requests fell on deaf ears. Sales strategies were heavy handed. Products worked only most of the time. Performance benchmarks were nonexistent.

Flash forward to 2005. Four years of recession has drained the coffers of many enterprises – and their vendors. Poorly managed vendors disappeared. The big guys are figuring out their next move. Yet the industry continues to renew: Even during the downturn, hundreds of new software companies have been born to take advantage of new technologies and business models.

With so many changes affecting the market today, Sand Hill Group decided to commission a study: CEO Outlook 2005. This new report examines software company leaders’ opinions of the coming year for the industry as well as their companies. (Click here for more information about the report).

The exciting part? The CEO Outlook 2005 study shows many signs that software vendors may be changing their ways – for the better.

Signs of Change
Now, as the industry seems poised for renewed growth after four lean years, it appears vendors may be responding to longtime complaints. Respondents to the study say they are using software as a service pricing. They recognize the impact of services-oriented architecture and open source. They are exploring options offshore – and undoubtedly other means to manage their bottom line more closely.

The participants in the study may be leading-edge vendors. Or they may simply represent younger companies. The vast majority of respondents were private which makes change easier: more able to change business models, adopt new pricing strategies and recreate products using the latest technology.

CEOs surveyed are bullish about their company’s prospects for 2005. Most are predicting double-digit revenue increases. They have budgeted for increases in profit and cash balances – not to mention marketing budgets and headcount. Clearly, executives are optimistic that the industry is on the mend.

Challenges Remain
But CEOs appear to be straddling two worlds: one in which they can watch the success of their own company, and another in which they are constrained by the realities of the overall software industry and today’s economic realities. They are optimistic, but realistic.

Many company leaders report their customers are very satisfied – yet fewer than half actually have a process for formally evaluating customer service. This is astonishing in a maturing industry which is dominated by a handful of large players.

The customer satisfaction finding is indicative of a larger problem: Lack of performance benchmarks. Software vendors need to operate like other value industries with close management of financial, customer service, product development and marketing metrics. In today’s highly competitive industry, anything less than constant attention to customer care is suicide.

Path to Change
In my experience, it seems every software company leader feels he or she is doing everything possible to engineer transition and to manage for the future. Review this checklist to see how your company stacks up.



Business model changes? How has your business model changed in the past year? Two years? If there are no changes going on, your company is not reacting to new market realities.

2) Customer monitoring? How does your company evaluate customer satisfaction? If informally, institute a customer satisfaction monitoring process which will monitor progress over time.

New technologies? What plans does your firm have for open source? Web services? Mobile technology? Enterprise customers are rapidly integrating these emerging technologies into their strategies and vendors need to incorporate them too.

New processes? What portion of your operations is outsourced? Offshored? How are you dealing with the predicted year of growth ahead? Re-energize your business model with new thinking and strategies by working with outside vendors.

Performance benchmarks? How does your company compare itself to the industry or to past performance? Every company must have a set of metrics to manage it which are watched over time and acted upon in case of diversion.


Clearly, the industry is in a period of transition. There will be many more experiments before it settles on a course. And there will certainly be new variables on the horizon which will shake things up yet again. It will take some time to reach the right model – much longer than anticipated. But many longtime software industry followers will applaud today’s CEOs for taking steps in the right direction.

M.R. Rangaswami is co-founder of Sand Hill Group and publisher of SandHill.com. Send us your ideas about how the industry is evolving and suggestions for performance benchmarks and change management. Email editor@sandhill.com