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Open source and cloud-based solutions have spurred companies to push for products and services that tangibly enable their business. Here's the upshot for vendors and their enterprise customers.
In 2014, Microsoft began taking its first steps toward entering the Linux and open source community. This week, it happened. Microsoft officially became a member of the Linux Foundation, joining the ranks of other major technology companies, like Oracle, IBM, and Intel.
The move makes sense. Over the past 10 years, technology companies have witnessed continuous pushback from their customers against older proprietary software and pricing models. With the acceleration of cloud adoption, the move toward open source solutions like Linux further gained momentum. In the midst of all this, a new software customer voice began to emerge. Customers were saying that buying software wasn't an end in itself. They wanted software to business-enable them—and they didn't want lock-in to proprietary software brands that required large upfront purchases.
On the sales and marketing front, the impact to technology companies and their C-level executives was immediate. Suddenly, software companies were seeing a drop of customer interest in proprietary on-premises software and moves by customers into the cloud. Vendors responded with wholesale movements of their software to the cloud, with large hardware and software purchases being replaced by pay-for-use or pay-by-subscription pricing models.
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But despite software's move into the open source community and onto the cloud, software company executives still must align their organizations with these approaches. How do they do this? What are customers seeking from their software providers?
Customers want to buy business enablement, not just software. If the software has features and functionality that will immediately improve business performance for the customer—and the customer can see how this can be done—the software gets adopted. As business rates of change accelerate and staffing highly skilled positions becomes more competitive, companies also look to their software providers to enable their businesses by providing them with best practices and strategies for their business verticals and/or for particular functions within the business, such as sales, HR, payroll, and logistics. In this environment, the most successful form of cloud software organization is SaaS (software-as-a-service). SaaS can provide both industry-specific software that enables the business and a vendor staff of industry experts who know the customer's business.
A true business partner
Customers want their vendors to stay with them and be responsive after the sale is made—and not leave them cold after the sale. The most successful software companies will maintain strong relationships with their customers long after a sales contract is inked. Their efforts will be realized in stronger rates of customer retention.
Three key takeaways
What lessons can be learned from all this?
- Software providers in the cloud marketplace need to continuously improve not only their software, but their back office support functions after the software sale is made so they stay relevant to customers.
- In the open source, pay-by-subscription models of software that exist today, it is far easier for customers to move to another solution if the software or the service and support do not meet expectations.
- Customers can now push software vendors for products and services that tangibly enable their businesses. This enablement comes in the form of reduced pricing that helps with the operating budget, as well as with service, support, and software that allows companies to run their business with greater agility and meet market demands, fluctuations, and business disruptions head on.
More CXO resources
- Industry cloud research report 2016: Adoption Plans, Decision Factors, Strategic Results
- Cloud computing policy
- Cloud platform spotlight: The top three contenders
- Hiring kit: Microsoft Power BI developer
- IT Budget Research: Where CXOs are placing their bets for 2017