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Archive for September 22nd, 2010

Big Enterprise Depends on an Inefficient Market to Give Them Unfair Advantage

Posted by Bob Warfield on September 22, 2010

Do you follow what I’m saying? 

Big Enterprise, and the bigger the more it is this way, benefits from and takes advantage of an inefficient market.  That would be a market where information is scarce, and in fact artificially scarce.  Hence these vendors often want to control the information all the more. 

Consider: if we want to contemplate a new word processor for our business, we just go buy copies of all the word processors, try them out, and decide which one we like best.  Big Enterprise Software is a different kettle of fish altogether.  If we want to apply the transformative magic that Big Enterprise Software promises, we can’t do that.  It’s so complicated to install, we can’t even begin to let you play with it.  Besides which, you have to make so many decisions that go to customization based on your specific business processes that even if we did let you play with it, you wouldn’t be having a representative User Experience.  Besides which, it can absolutely do what you need it to do, and it will do so much better than the competition.  Trust us, because we’re the Big Enterprise Vendor and we wouldn’t have gotten here if we didn’t have the best thing going.

It’s diabolical.  The much more expensive and risky purchase that Big Enterprise Software represents actually needs more scrutiny than the word processor purchase, yet it gets dramatically less scrutiny because the information available in this market is distributed very inefficiently.  In general, you can trust the salesman, or you can trust the customer references, or perhaps your friendly neighborhood SI.  Most of these people are not aligned with your interests and none of them knows your business as well as you do.

Now, looked at in that way, do you wonder that Big Enterprise Software prefers an artificial scarcity of information?  It’s really in their best interest many times.  Except that CIO’s are no dummies.  They’ve been around the block and talked to other CIO’s and they know they’re taking their own career into their own hands if they can’t find some way to pierce the vows of omerta.

I was reminded of all this as I looked on with some dismay at an experience that befell some of my fellow Enterprise Irregulars at Oracle Open World.  Vinnie Mirchandani tells the story in his own words here, but essentially a group of influential bloggers got kicked out of a session reserved for analysts.

Oracle has a reputation for being a very aggressive tough company.  I suspect they like the unfair advantage an inefficient market offers.  Not all vendors are that way, interestingly.  There is a reason Dave Duffield was very unhappy about having his company absorbed by the Oracle collective–they had a kinder gentler view of how one should interact with customers.  In fact, I commented to my fellow Irregulars on this idea that it might even be detrimental to app vendors to act this way:

“In fact, a deeper issue would be whether Oracle’s tactics are what kept
them from being able to grow their own apps business more successfully.  It
could be that this sort of thing is okay if you’re buying a DB server, but
not so hot if you expect a long term partnership around an application

That resonated with some of the collective.  It’s also interesting to read Vinnie’s account of how he was welcomed by another company that even welcomed competitor Oracle’s representative.  Clearly there are some that are not so focused on maximizing the unfair advantage of market inefficiency.

Getting back to Vinnie’s story, he and Dennis Howlett were two of the three ejected (I don’t know the third man, so won’t comment), and I can see why a vendor that likes an inefficient market would want them excluded.  Vinnie and Dennis are tough no-bullshit customer advocates and not vendor glad handers.  The trouble is, the Internet makes it harder and harder to cling to an Inefficient Market.  It is so easy for CIO’s to find and hook up with peers via networks like LinkedIn.  Anyone who wants to can write a blog with either their public or private persona.  There are consultants out there who make a living coaching customers on how to negotiate tough with these vendors and reduce the information disparity a vendor has over the poor customer.  If you’re a customer, you want a transparent vendor and you want to discourage the inefficient market.  Information is always to the customer’s advantage.

It’s very possible that with a few more turns of the acquisition crank, Oracle may engineer its way into the largest computer company in the world.  Don’t bet against Larry Ellison.  Heck, buying HP alone (which has a similar market cap) would put them at $150-160B a year in revenue and comfortably ahead of IBM.  With Hurd on board, the scenario is not entirely far-fetched.  But you have to wonder whether man-eating shark sales tactics, financial engineering, and a reliance on an inefficient market will be enough to sustain such a behemoth, or whether in the end of the day, innovation, transparency, authenticity, and a real partnership with customers won’t be a better bet. 

I sure hope it’s the latter.

Related Articles

The World is not unaware of Oracle’s tactics

Oracle’s Influencer Relations: Mom are we There Yet?

Does Big Enterprise Have an Unfair Advantage?  Left a comment on that RWWeb post.

It isn’t just Big Enterprise Software that likes inefficient markets

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