You have perhaps heard of the metaphor of a frog being boiled: raise the temperature slowly enough and the apocryphal frog will not notice before it is too late. The likelihood is that this is false. Regardless, it’s always the first image that comes to mind when I think of a certain segment of the software industry.
I’m referring to an unsavory practice in the proprietary software industry where a product that is no longer growing is acquired by an enterprise that specializes in extracting maximum rent from the acquisition. The playbook is generally the same:
- Reduce investment in product enrichment and enhancement
- Aggressively cut internal ongoing costs
- Cut sales/commercial staff, in the expectation that there are few if any new customers to acquire
- Raise the cost of subscription renewals, with a policy of no-negotiation
- Strong adherence to license terms and conditions, and migration to
The goal is maximum profit from the existing customer base, losing them, one-by-one, until the product is gone.
From a capitalism perspective, this is all well and good., A company can choose to manage its product and pricing how it chooses. The market will make its mind up.
From the customer perspective, the process is absolutely awful. Gone is any form of real relationship with your account team. Instead, at renewal time you get his with a substantial uplift and a no negotiation policy: pay or litigate. The quality of support declines, new features slow to a trickle and you quickly realize you need to come up with a plan. This sucks: instead of focusing on new features for your own customers, you’re now justifying to your business partners why you need to invest lots of time and effort on a migration: something that delivers 0 value to your customers.
Now, companies engaging in this model will, perhaps, deny they’re doing it. But if you’ve been on the end of the renewal negotiation, you know. When we look at new software, the risk of being a frog is always present. How can we minimize it?
- The risk is lower (but doesn’t disappear) with SaaS than deployed software - since the interests of the supplier and customer are more tightly aligned: Generally, greater usage of the software means more revenue for the supplier. They thus have interest in retaining and growing the platform.
- Any softwares that is Open Source (or has an Open Source variant) has some degree of protection: you can always go your own way and self support.
- Software that is part of a larger service offering is safer: while a large cloud vendor may decide to deprecate a particular product, the customer is likely using many other services and the vendor has incentive to keep the customer happy.
- The easiest (but hardest to implement) remedy is contractual: place terms in the master service agreement that limit the behavior: whether this is realistic depends on who has the negotiating leverage.
Vendors: if I’m skeptical and hesitant when you reach out to me, this is one reason why. Ultimately, this all makes us more wary of new products. That’s not healthy for our industry.