Stack Vendors vs. Pure Plays, Round III

Scott Francis
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A quick recap of the stack vendor vs. pure play debate: Round I occurred primarily on the ebizQ BPM In Action blog moderated by Dennis Byron, in the following posts: I think Round I essentially ended with Dennis and I agreeing to disagree – but I think the majority of comments that got past moderation supported my view.  He asked me for specific examples of stack vendors engaging in this behavior of giving away BPM while charging for, say, Websphere – before he would believe my assertion that stack vendors will give away a component against a pureplay vendor to win a deal (not just in BPM, but in any space).  Well, unfortunately any information I have along those lines is not something I’m able to disclose except in the most general way, which wouldn’t fit his definition for specific data point. Round II is captured best in two blog posts on the BP3 blog – (and I welcome comments on our site, as they are only moderated after the fact – your comments will show up right away, and you’re only subject to moderation if they are viewed to be spam by askimet). First, there was Stack Vendors vs. Pure Plays, and then there was a followup about Oracle’s acquisition of SUN.  In the latter post I focused on why stack vendors don’t have enough focus to really innovate… In the former post, I focused more on the overall debate:
[…] if a vendor is giving a piece of software away, you should be suspicious- anything a vendor is giving away for free (or nearly so) isn’t likely to get a lot of investment of R&D dollars going forward.  Software companies tend to invest where they see a competitive edge, and they tend to discount and under-invest where they don’t.  It isn’t irrational behavior, and it isn’t a question of good/bad or good/evil – its just the trade-off of stack versus pure play.
For some reason, others doubt these basic laws of Software physics, but I don’t.  As you can imagine, I was quite pleased to be vindicated at least partly by a recent post from Phil Gilbert, President of Lombardi, entitled with the usual flair:  “Flash: Free IBM BPMS Worth Exactly What it Costs” (for the humor impaired, he’s saying it is worth exactly the zero dollars it costs to buy it… ).  Phil rips IBM pretty good in his post, and I couldn’t resist quoting him… So, here it is, quoted for you Dennis:
Today one of our customers said they were told by IBM: “why spend your money with Lombardi, we’ll give you our BPMS for free.” I finally agree 100% with IBM on something: their BPMS is worth nothing. Getting a cheap BPMS is like buying a dancing elephant for a dollar: cool, but who can afford to feed it?
I particularly like the dancing elephant line… but for Dennis Byron, I think you have your specific example.  Let’s take that elephant line again though.  Right, someone has to feed the elephant.  This isn’t just you, the customer.  Yes, Phil argues that the customer will have greater development and maintenance costs, and fewer process benefits, using IBM’s BPMS than by using, say, Lombardi’s.  But it is also about IBM.  How will they afford to pay their development staff on their BPMS if they are giving it away?  Someone has to be paying for software in order for IBM to maintain their development team – they have to feed the elephant.  If they can’t explain how many developers they have, how much that costs, and how their zero price solution will pay for those developers, you have to wonder how long Big Blue will keep making that investment, no? This same logic applies to smaller stack vendors, only moreso – they don’t have the financial resources of an IBM. How else to Stack vendors use undue leverage to get a sale in a software category they aren’t really any good at:
But this notion of getting “free” or highly-discounted software from strategic vendors has currency. How many times has your company picked up some crap from some vendor because it’s on a discount schedule and you have to buy x amount of software each year to “maintain your discount.” So let’s discuss the cost of software, and the value of software.
Yep, that’s right.  They get you to buy into the notion of “maintaining your discount.”  Wow.  I sure hope my local car mechanic never learns that trick. I have another example.  The McDonald’s near my office started giving away McCafe drinks earlier this year – to get people to try them.  I tried my free McCafe – and it was so bad I went screaming back to Starbucks.  The difference between a McDonald’s and Stack Vendors is that at McDonald’s their food/drinks have to be good enough to get my return business – I tasted the drink, and rejected the free value proposition.  At a big Stack vendor, they’re hoping you don’t actually “drink” that free drink – they just want to book the revenue, prevent a “competitor” from getting a toehold in their turf, and help you “maintain your discount.” If you don’t taste the software, you may never know you’ve been had. As long as IBM is giving BPM away for free, maybe its time to ask why Websphere isn’t free… after all, JBoss is… Maybe they can explain why Websphere is worth some coin and JBoss isn’t?  And then maybe you can ask IBM why that same logic might not apply to the BPM space? Phil, thanks for re-opening the subject and thanks for a very entertaining read! Quick update: from a more recent Dennis Byron post on Open Source vs. Licensed Software:
The IBM-sponsored speaker is Matthew Brown of Forrester and the subject is portals rather than BPM but the findings and the underlying thought process can be applied to any project. The message is simple: open source Ts&Cs are like any other license Ts&Cs. And license Ts&Cs are only a small fraction of your IT project costs whether it be for BPM or anything else. And sometimes open source Ts&Cs can dramatically increase the rest of the IT project costs. To the caution of “pay me now or pay me later,” add the caution “what I give you with one hand, I take away with the other.”
Let me put this in context… IBM came to this conclusion:  License costs are a small fraction of your IT project costs.  Apply this to the debate above – that free BPM software can incur costs that far outweight the licensing costs of the paid BPM software  – whether it is opensource or just free.  And you’re actually more at risk if it is free, but not open source because you can’t modify or improve the source code yourself…
  • Harald Nehring

    Having worked in the real life of large software vendor sales AND product teams, I’m sure the BPMS folks at IBM cringe when seeing there product being “thrown in” to any other deal at a high discount. Where you’d like to detect an evil scheme, there’s nothing else than another desperate sales exec trying to make his quota at any cost. They work for a large vendor exactly because there’s so much goodies to throw in without worrying about overall product profitability.

  • Harald Nehring

    Having worked in the real life of large software vendor sales AND product teams, I’m sure the BPMS folks at IBM cringe when seeing there product being “thrown in” to any other deal at a high discount. Where you’d like to detect an evil scheme, there’s nothing else than another desperate sales exec trying to make his quota at any cost. They work for a large vendor exactly because there’s so much goodies to throw in without worrying about overall product profitability.

  • @Harald –

    First, let me just say that I don’t detect evil! :) Phil has his competitive fires stoked in his post, and its easy to get caught up in that, but I don’t consider the tactics evil, I just believe that when they are widespread, it hurts innovation in the BPM space, and causes customers to waste time and money on products that are inferior.

    I used to work at a much larger software company, and we employed these tactics all the time to push other vendors out of our deals. At the same time, we would compete with the IBM’s of the world and try to prevent them from similarly outflanking us.

    I know it makes the product teams cringe, because that’s their lifeblood being given away – blood, sweat, tears – and the more it is given away, the more likely they are going to be reassigned to a group that is still selling software for real money. That’s just the way it is.

    As for the desperate sales exec – I’m not sure it is so much desperation as just standard operating procedure. Since I’ve seen BEA, IBM, Oracle, MSFT, and others do it… I can’t imagine it is just a reaction to quota stress on a single deal :)

  • @Harald –

    First, let me just say that I don’t detect evil! :) Phil has his competitive fires stoked in his post, and its easy to get caught up in that, but I don’t consider the tactics evil, I just believe that when they are widespread, it hurts innovation in the BPM space, and causes customers to waste time and money on products that are inferior.

    I used to work at a much larger software company, and we employed these tactics all the time to push other vendors out of our deals. At the same time, we would compete with the IBM’s of the world and try to prevent them from similarly outflanking us.

    I know it makes the product teams cringe, because that’s their lifeblood being given away – blood, sweat, tears – and the more it is given away, the more likely they are going to be reassigned to a group that is still selling software for real money. That’s just the way it is.

    As for the desperate sales exec – I’m not sure it is so much desperation as just standard operating procedure. Since I’ve seen BEA, IBM, Oracle, MSFT, and others do it… I can’t imagine it is just a reaction to quota stress on a single deal :)

  • IBM’s strategy isn’t dictated by the programmers who, no doubt, are working hard. But let’s get real: the IBM BPMS is a collection of tools that weren’t (and aren’t) primarily purposed for BPM! So to say there’s been a ton of BPM-related innovation at IBM is to ignore the reality.

    IBM is using Websphere-based stalking horses to confuse the market into thinking they do BPM. The only other explanation is that their definition of BPM is wildly different from the pure-plays (in the same way that Orwell’s “War is peace” is wildly different from anyone else’s notion that ‘war’ and ‘peace’ are synonyms…)

  • IBM’s strategy isn’t dictated by the programmers who, no doubt, are working hard. But let’s get real: the IBM BPMS is a collection of tools that weren’t (and aren’t) primarily purposed for BPM! So to say there’s been a ton of BPM-related innovation at IBM is to ignore the reality.

    IBM is using Websphere-based stalking horses to confuse the market into thinking they do BPM. The only other explanation is that their definition of BPM is wildly different from the pure-plays (in the same way that Orwell’s “War is peace” is wildly different from anyone else’s notion that ‘war’ and ‘peace’ are synonyms…)

  • Phil –

    Good points!
    Your last point about the definition of BPM reminds me of a press release SAP did about 2 years ago about BPM… which, if you read their definition, was merely EAI (integration services), and a “totally new groundbreaking category of software” that they called Collaborative Application Frameworks (CAF)… which would be available in … you guessed it… 2 years… and if you read the definition slowly, you realize that CAF was describing a BPMS. Curiously, I haven’t seen a press release about CAF being released into the wild. And their attempt to rebrand EAI as BPM hasn’t taken with the market…

    So, should we be surprised if IBM plays at the same tactics? Probably not.

  • Phil –

    Good points!
    Your last point about the definition of BPM reminds me of a press release SAP did about 2 years ago about BPM… which, if you read their definition, was merely EAI (integration services), and a “totally new groundbreaking category of software” that they called Collaborative Application Frameworks (CAF)… which would be available in … you guessed it… 2 years… and if you read the definition slowly, you realize that CAF was describing a BPMS. Curiously, I haven’t seen a press release about CAF being released into the wild. And their attempt to rebrand EAI as BPM hasn’t taken with the market…

    So, should we be surprised if IBM plays at the same tactics? Probably not.