In a real estate buyer’s market, houses tend to sell for less and sit on the market for a longer time. In such a competitive market, buyers determine the conditions and the prices of the sales. In the software market, customers tend to forget about themselves. With these three following recommendations, buyers can get more value for their money in the software market.
Software is transforming every industry on earth — “eating the world” as technology investor Marc Andreesen predicted in 2011. He was entirely right about the relevance and role of software in the digitalization wave, which has come at us since then. Its traces can rightfully be observed in the corporate expenses for software. In the broader context of overall business spending on IT, the software market has had a clear lead in growth. It has expanded its share of global IT spending from 14.6% in 1995 to 24.4%, according to recent estimates of Forrester (‘The future of the enterprise software industry,’ 2019). Overall, enterprise software spending grew at 7% per annum from $172 billion in 1995 and will reach $920 billion this year.
Forrester predicts this steep rise of software spending will flatten to a 4% increase annually in the coming decade. Three factors cause this economic trend. Falling development costs, free or low-cost options (including open source), and more transparent pricing will put price pressure on software in the coming years. A driving factor of decreasing development costs is the exploding new world of PaaS- and SaaS-based application development. Through their graphical abstractions, such platforms enable business users to redesign and automate their business processes to a high degree. These same tools are beneficial for the productivity of custom development as well. Thus, this democratization of power brings new conditions to the table and reshapes software into a buyers’ market.
Why do companies so easily overlook the universal law of demand and supply in the software market? What could change this? There are three common reasons why buyers tend to forget about themselves when they make significant investment decisions in their application portfolios. First of all, most companies are too risk-averse and, consequently, make choices for big labels, which don’t necessarily bring them value for the money. Secondly, internal buying processes are so fragmented that companies forget about the red line. And thirdly, companies have to invest in their software knowledge and capabilities. Just as the chances are higher for well-educated buyers to strike the best deal in the housing market, so it is in software. The mentality needs to change.
Nobody ever got fired for choosing IBM. Although it is a standard formula, it unfortunately still contains much truth. Many executives believe and hope that choosing a big label with its size, perceived quality, and reputation would help to guarantee a project’s outcome. Choosing the giant in the room to ensure success seems a logical, safe choice. As a result, decision-makers have had a preference to hold on to the status quo and their existing suppliers.
Improvement starts with educating yourself the right way. The application market has changed and has become much more competitive, disruptive, and more innovative. Even in the past, but certainly nowadays, there are plenty of new solutions and companies that bring much more value to the table. In the housing market, a broker’s assistance is customary, so why not try the same with software? Getting relevant information from peers and external experts will make the IBM-quote irrelevant in the coming years.
The software purchase usually involves many participants in the decision-making process. That is especially true as the value of the investment increases. In the case of strategic investments in software, several individuals from across the organization are speaking out. Managers reason from their perspective in the buying decision. Intended or unintended personal choices and arguments play a relevant role and ultimately impact the company’s strategic direction. The number of people involved in the decision tends to increase to such a degree that fragmentation is a reality. As a result, the common thread in the company roadmap is pushed aside.
The current love to solve every business challenge with a different blend of best-of-breed software is a direct result of the varying interests of departments or managers. This can have some detrimental effects, because best-of-breed solutions don’t necessarily integrate that well. To make sure data can be exchanged between applications and business processes, IT has to build and maintain APIs and enterprise service buses. These integrations lead to high costs and inflexibility. Today’s business challenges demand integrated systems on a whole different level. In its current form, interfaces between separate systems are a millstone around the neck. An incoherent constellation of systems prevents organizations from adapting to the current unremitting pace of change. A disciplined, CEO-sanctioned road map is essential to ensure the application stacks lay the right foundation for business execution.
New low-code platforms have given software development into the hands of business users, but many organizations forget to act on this new reality because of mentality. Development processes used to require specialist knowledge of the programming language, and the process was challenging to understand. In model-driven development, business users model all the artefacts and application needs, such as the business process, data model, and process flow. Such tools make development more productive and risk-free because the complexity is in the ‘engine’ – where the system converts the model into software code. The productivity can even be brought to a higher level when applications can be composed of existing and proven components to a large extent. Forrester designates Novulo, Oriana, Ultimus, and Vizru as examples of this new prescriptive low-code generation, which brings new levels of speed, agility, and return-on-investment to application development.
Designing a house is a different role than actually constructing it. In the same way in application development, modeling software is one responsibility and the actual development another, which can be combined in current low-code platforms very well. By investing in modeling your domain knowledge, you get a better grip on processes and data and application development. By adopting PaaS-tools and developing your skills and capabilities in modeling, organizations should emancipate themselves. But this requires a different mindset towards building and sourcing software. Modeling your business rules and domain knowledge might be a better option for many organizations than outsourcing it together with software coding or buying standard packaged software and knit these together with integrations.
The current democratization force of low-code platforms brings new conditions to the table. In this blog, I gave three recommendations to get more value for money in the software market. Getting the facts about new and upcoming low-code platforms enables companies to get the right perspective on risk. Second, the inherent disadvantages of best-of-breed results in fragmentation with its detrimental effects. In buying decisions and in the resulting application stack, a relevant quantity of standardization is essential. Companies can buy themselves freedom by relying less on integrations. Above all, a new mentality is necessary. The rules of the game around enterprise applications have changed now that that modeling software by businesses themselves is a reality. Many companies have already experienced that in current challenging times, it is essential to have the right knowledge, resources, and technology to change course aptly and promptly. Modeling your future in software is the way forward in the current buyers’ market.