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Key signs that convey your technology vendor’s approach to investment in their products

(Image credit: Image source: Shutterstock/violetkaipa)

A common bug bear that enterprises have of their technology vendors is along the lines of “we spend a fair amount of money on support and maintenance contracts with software companies and yet their technology is legacy”. One hears this most frequently in the context of client expectation of a new cloud based version – i.e. the on-premises legacy applications are not being made available in the cloud, or a cloud version is still a long way off in the future, or that a half-baked cloud solution has been provided which was not originally designed for the purpose and provides few of the benefits of a true multi-tenanted, elastic cloud  solution. In such cases, I have sympathy for both the technology vendors and their customers.

Vendor challenges

It’s an utterly understandable sentiment on the part of customers. They want to invest in solutions that keep pace with the wider technology advancements and their evolving business requirements. Transitioning away from business-critical applications is a complex, sensitive and time-consuming task – even in the cloud. Consequently, once organisations have invested in a solution, some feel beholden to the technology vendor – be that on account of systematically rising solution maintenance fees or indeed the product improvements (or lack of) that are delivered to them.

On the flip side, the challenges that vendors grapple with aren’t easy – fast paced technology advancements, ever-increasing staffing costs, need for newer skill sets and so on. Most software application providers try to make timely investments in their offering. Given the rapidly evolving technology, an IT-led business environment and ever-growing competition, they cannot afford to be complacent, regardless of where they are on the ‘innovation’ curve.

The client expectation of their current on-premise system software vendors is that in return for their, not insignificant annual software maintenance fee, the software vendor must continue to provide development resources to fix bugs and support for changes and new releases of the underlying software architecture – including operating systems, databases, web servers, browsers, etc.  There is also the expectation that the product will continue to be enhanced with new functionality, more modern interfaces and better integration points.

The software vendors are caught in the situation where in addition to supporting their current on-premise products to meet those client expectations, they have to invest significant time, costs and resources into re-architecting their products for the cloud environment.  This can cause a conflict between their legacy system and cloud system roadmaps.

That is why software vendors that have a legacy system will usually provide their new cloud version of the system as a completely ‘new’ system, with its own new cost and licencing plan – rather than just an upgrade.

Key signs to look out for

There are signs that can indicate a technology vendor’s approach to investment in their offering. Foremost and most obviously, if legacy product improvements are slow or far and few between, it may indicate that much of their resources are being diverted away from the legacy system development towards the new shiny cloud-based system. While this is understandable, it needs to be handled sensitively with clients who are reliant on those legacy systems for a much longer time and are paying substantial annual maintenance fees.

In the case of cloud-based systems, of course, in today’s world of agile software development and cloud-based application deployment models, there is no excuse for lack of incremental improvements and regular feature/functionality updates.

Similarly, a vendor’s approach to integration with other enterprise software solutions says a lot. This is not to say that the provider of a single, multi-functional ‘jack of all trades’ standalone system is averse to innovation, but in reality, no one technology can deliver best of breed advantages on all counts. With digital transformation projects underway, organisations are looking to create seamless work environments across the business in order to optimise their investment in the various systems they deploy. Technology vendors that keenly work with complementary solution providers can focus on the aspects of their solution that provide real benefit whilst demonstrating that they are devising ways of delivering value to their customers and helping them maximise the return on investment in other systems.

Business transformation and re-organisation has become commonplace, but the nature of these changes can be a tell-tale sign. For instance, wholesale changes at the executive level are often a major organisational distraction. In technology vendors, they diminish focus on key business deliverables such as service quality, product roadmap management and development and so on. On the other hand, if a re-organisation is more technology-led and customer-facing, it highlights a desire to potentially improve client experience.

In the same vein, sometimes technology companies, especially those that are venture capital (VC)-backed, restructure operational elements, mainly to control costs and reduce overhead, which may not always benefit customers. One such example is where multiple software vendors are merged, and then global teams are consolidated into a single location. While on paper – i.e. financially – it may be a good idea, whether or not its beneficial to customers is highly debatable.

The long-term financing and funding strategy of a technology vendor is another give-away on their approach to product development. Intrinsically, the VC model is such that once a company they are backing reaches a particular size or milestone, it is typically sold or acquired by a larger business. Therefore, it isn’t uncommon for a VC-backed technology provider to, at a critical stage in the lifecycle, focus on maintaining and growing annual subscriptions. A larger subscription base gives the company annuity, which significantly increases its value.  The product development falls by the wayside and in some rare cases, even leads to product stagnation.

Not all acquisition is bad though. A larger technology vendor that is purchasing an innovative start-up, giving the acquiring company a cutting-edge capability is a major positive for customers.  For instance, some forward-looking companies providing enterprise solutions have gained artificial intelligence capability through acquisition and embedded it into their products. This approach has significantly helped vendors leapfrog technology to deliver the most advanced solutions to customers.

Roy Russell, CEO, Ascertus Limited