So in case you’ve missed it, I’ve been talking about how fixation on license fees can have a negative impact on on both the customer relationships and on product development. There has been a reason for this conversation, the need to transform Content Management into a commodity.
This was discussed at the EMC Writer’s Summit event earlier this month. Led by Andrew Chapman, we tried to identify what we could accomplish if Content Management was commoditized and was just there to be used. Johnny Gee followed up this discussion with a post about ECM as a Commodity, sharing some of his thoughts in more detail.
Before talking about the license fee impediment Content Management Commodization, I’m going to touch on the Commodity issue a bit.
Can’t See through the Cloud
While leading the discussion on Content Management as a Commodity at the Summit, Andrew kept harping on us to think outside the box. The problem was that we have been stuffed inside the box so long, we can’t imagine running, we are focused on the concept of just being able to have a good stretch.
Think about scanning. Fifteen years ago, you would sell a scanning solution with a simple repository. The documents would get scanned into the repository and work carried on as before. The difference was that desks and offices weren’t so cluttered.
Then people realized that we could change processes because they had been liberated by paper. Instead of requiring documents to go 5 people successively, it could go to them all at once. Then we realized that it only had to be approved by 1 of 2 people and the other three just wanted to be kept in the loop. It wasn’t until we had been liberated from the pressing weight of paper for years that we could see the extra freedom that going electronic brought to us.
The same thing is happening with the Content Management. If it is a commodity and I don’t have to worry about storage, high availability, upgrades, interoperability, scaling, and all those other “non-core” issues, I can become liberated to focus on solving business problems. Once that process begins, we will all be able to realize that we can not just stretch but we will be able to run.
Of course, we aren’t there yet….
Old Models=No Future
Here is the basic problem. The license fee structure slowly grinds systems down and hurts the customer relationship. It is also preventing from moving to the future.
For Content Management to be a commodity, and not merely inexpensive, it needs to be on-demand and charge me for what I use. I can’t have to worry about how it is implemented behind the scenes. The core engine should just work.
The question is, how can today’s leaders get there? Their entire business model is structured around license fees. They absolutely cannot move to selling a service/subscription without changing how they measure success.
Box has it worked out. They give away basic Content Management. Need more storage or features? They charge you for those. Simple enough. Box just needs more features like Records Mangement and Transformation Services (and CMIS) to truly attack the corporate market.
Why can’t established vendors throw their platform up there and offer the same type of service? Several reasons:
- Architecture: Most live in the confines of a 32-bit world. They aren’t designed to really be that flexible. They definitely can’t live in a simple SaaS provisioning model.
- Interface: Most don’t have simple interfaces that scale readily and that are very simple. There has been improvement of late, across the board, but they aren’t there yet. Mostly because they are still focused on solving the interface problems from five years ago.
- Financial: This is the big one that I have been discussing the past week. Until this is resolved, the Architecture won’t be touched.
The commodization of Content Management is needed. We need to take Content Management from a technical to a business discipline. Consultants like myself need to stop learning the ins-and-outs of an entire technology stack and start focusing on the details of a business problems. I’d love to focus on Correspondence Management or Collaboration-Enterprise 2.0. That would be fun. The thing is, when I do focus on it, I always get yanked into the technology to make sure that the software solution that we are using to solve this problem actually works.
Traditional Content Management companies are in trouble. Not because they aren’t Open Source and not because they are burdened by a ton of legacy code. They are in trouble because they are shackled to the license fee. That prevents them from moving forward to actually solving their clients problems.
Their clients’ biggest problem? They have to keep thinking about solving Content Management!
The future of Content Management is in the Cloud. It isn’t a set of virtual servers, the so-called “private cloud”. It is in the Software as a Service mold of the cloud. Take my pain away. Make me not have to measure storage performance (which I did TODAY!) in order to make sure that my system is delivering on its potential.
Take away my technology! Turn me into a solver of BUSINESS problems! Go ahead, I dare you!
I triple dog dare you!
Word of Pie 
Laurence,
There are SaaS content management solutions available that do just that: allow customers to focus on solving business problems, charging them for usage and not a license tax, and importantly go beyond consumer-oriented ad-hoc document management to supporting document workflows and light-weight contracts and records management.
These applications also allow customer self-provisioning (sign-up online!) and trial periods that allow customers to “kick the tires”. Some have integration with existing productivity tools such as Microsoft Office, and even have nascent CMIS interfaces.
Disclosure: I’m the CEO of KnowledgeTree, and we do all of the above 😉
Best regards,
Daniel
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I hope that someone from DCTM is reading this. They’ve provided useful interop technologies such as DFS, RESTful services and a CMIS implementation and just as you’re thinking about all the cool mashups/integrations you could develop it dawns on you that you need to pay a license for each custom application. Doh.
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This is something I specifically mentioned to EMC along with the need to eliminate the licensing confusion when a product line changes. It’s especially difficult for long-time customers when a product is split or combined with another. I can see where a customer would be afraid to ask for fear they would end up paying more for a product they don’t need when it isn’t clear what the upgrade path for that product.
I can think of one instance a few years back where an included feature was suddenly “broken off” into a completely new product. The newly relabeled product didn’t have any enhancements or changes. It was just packaged separately because it represented another revenue stream. I caught it because I’m so familiar with the architecture. I’m still not real happy about how it affected long-term loyal customers. (Note: I haven’t seen this happen since and I have noticed some improvement in how product changes are handled. More can and should be done though.)
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This discussion seems to have parallels between deciding to purchase or lease a new car. I can purchase a mid-size sedan for $25,000 and pay for yearly maintenance. Or I could lease it for a lower monthly payment and I can trade it in for a different model anytime I want.
I happen to be the type of guy who pays for the car and then drives it into the ground. Maybe that’s why I prefer the “legacy” model for software. There’s a large payment upfront, but I consider it “paid for” aside from the M&S. SaaS is much, much less upfront but over the long run will cost more. Which situation is better for your company is going to depend on various factors like implementation size and time, long term plans and business objectives.
One difference between software and car maintenance is that software M&S (depending on the vendor) gives me new features and capabilities. It’s like taking the car to get an oil change and they throw in GPS navigation and a sunroof.
In the two software sales models being discussed what is the true difference in M&S? If the motivation is a *quality* product, and for the moment ignoring vendor budgets and politics; there is no difference. So in a perfect world, the legacy model is actually better for the client in the long run. And by long run, I’m talking at least 5 to 10 years.
As a customer, I’ll factor that into my weighted vendor comparison along with product features, vendor stability and reputation and vision. Personally, cost isn’t important as meeting my business objectives through product features and abilities; but if all things are equal I’ll consider the long-term cost.
The flaws in the legacy model can be overcome with proper sales training and supervision. Don’t focus only on new sales. Build a continuing relationship with your customer. Have management think long-term revenue instead of short-term windfalls that lead to later company downfalls.
Above all, avoid my personal pet-peeve: never, ever nickel-and-dime the customer for service connections. It’s triple-taxation. Just because your product has the ability to connect to a service or platform doesn’t mean you *have* to charge me another two times for it. If you’re going to pitch case management platform solutions, it’s more fair to everyone to license for the case management scenario. Not for each individual component that scenario happens to touch.
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Chris,
We often don’t look at the TCO of our on-premise, licensed apps: hardware, people, license fees, and of course maintenance.
Granted, for some organizations some of the above may initially be a sunk cost, but for many (most?) organizations, the numbers are very, very compelling.
Additionally, consider the cash flow impact and accounting treatment of an expensed subscription application versus the capital investment in the above.
Daniel
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SaaS does become very compelling when your business requirements perfectly align with the offering. You obviously have more experience in this area, but I see many startups, small and medium companies go with SaaS because of the rapid implementation (turn-key in many cases; which is critical to some startups) and the aforementioned feature alignment. It’s a good opportunity to build that initial customer loyalty.
That introduces several interesting quandaries. Can that SaaS support a rapidly growing business? Will the SaaS face the possibility of developing to the whole at the expense of the individual? How vulnerable is the SaaS to outside forces? (Disaster, regulation, security.)
The “legacies” need to make their own decisions. Sacrifice the small customer and only go for large corporations? How to effectively demonstrate ROI to the customer? Can they innovate their product as quickly and effectively? Does a individualized approach help or hinder?
I like to keep an open mind. Everyone’s situation is unique; although, there are many shared commonalities. I don’t have a philosophical preference. I say give me the best software for the situation for the best price. I just also happen to know there’s a lot of homework that needs to go into it.
Thanks for the feedback Daniel.
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When I was talking about SaaS, I do want to point out that I am thinking of a specific set of features/capabilities (future post). Essentially, I want a platform that I can interact with standards and an expanded set of interfaces. I need an interface that allows for basic content services/collaboration and to administer things. I am not necessarily talking about a specific business solution. I may get that from another vendor and connect them together.
I need flexibility. I need it to be there. I need it to be easy.
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I look forward to reading your forthcoming post and participating in the debate.
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I personally believe we may need to differentiate between symptoms and issues. The License Fee and Subscription models are not only applicable to ECM, but it is prevalent in all enterprise-wise software products such as database, ERP, and enterprise hardware including ECM. The License Fee model works for any enterprise-wise software or hardware. If ECM becomes commoditized and/or clouded, then of course, there won’t be any license fees naturally, just like Apple or Microsoft. The License Fees and Subscription models are just symptoms and it won’t disappear as long as we have enterprise-wise software or hardware. Take a look at your good old paper documents. If it is written in English, then anybody who understand English can comprehend except documents written in fashion of legalese, in that case you may need a lawyer to help you to comprehend. You don’t need Documentum, IBM, or Microsoft application to understand the documents in paper. Although there is the CMIS movement to help us to communicate between the proprietary systems, it will not provide the complete solution. Eventually, all ECM will be commoditized, whether we like or not, all of ECM functionality will be absorbed into “Object Storage” system instead of the current “File Storage”. Although we don’t know when this will become reality, it is coming. When it does, we all are going to work differently than we do now as content specialists/integrators since there won’t be any separate, so called, structured or unstructured contents anymore. They all will be absorbed and become part of some “Object Storage” system in the future. We will definitely be out of the box then.
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Brian, you raise some good points. My primary point was that the existing “leaders” are not going to be able to make the transition without a change to their financial model first. There are lots of related issues to this structure as my previous two posts discussed.
These issues do apply to other classes of software. All of them are just in different places on the curve and have different pressures on them.
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I think there is room in the economy for both models. The traditional model might not have a future on the long term, but I won’t put a bet on this yet.
When I’m talking to potential customers, they are very accustomed to this old model. So it’s a thing we don’t actually discuss much.
I’m also selling SaaS solutions. I have customers which understand this one very well, and it goes naturally with them.
Trying to convince one or another of the “other” model is sometimes like preaching to a wall. It’s not worth the effort.
I want to focus on the business solution. The license model should be flexible and predictive enough to adapt to the customer. And that’s it.
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Boy I think you hit the nail on the head with the financial comment. I work with Oracle UCM from the Stellent days and Larry constantly is in a huff about cloud computing and SaaS and what it really is. Is cloud hosted apps or is is hosting platforms such as amazon EC2 was his latest rant. It was pretty entertaining when they launched the Exalogic machine at Oracle World.
I think in my definition of Cloud is basically it’s a finical shift, not a tech shift. As Uncle Larry has ranted before its basically all still code running on machines, ignore the fact that some of the architectures would have to change to fulfill the multi tenant thing. Cloud computing is a shift from the big time rain maker license deal to a lets buy what we need as we go along. The “leaders” as you say may just need to a a usage meter to the current products and change the licens from perpetual to per user/usage based.
Until the “leaders” figure that out there might be trouble. Too bad the license deals for shelfware must have been a nice way for him to pay for his yacht’s.
Of course improving the software to make it more interoperable and modern, after all the code bases of the “leaders” as you say are a bit long in the tooth, would be welcome. But finances rule the day.
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