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| Home - Industry Article - Apr 04 Issue |
The Next Wave of Software Business Strategy
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The Race Offshore. The offshoring issue has become a politically charged one, but most venture capitalists and executives agreed that it was a vital step in order to renew the strength of the industry. Romesh Wadhwani, chairman of Symphony Technology Group, called on software companies to dramatically reinvent their business models. And in order for vendors to provide shareholders appropriate margins, software companies must take development offshore. Speakers provided estimates of offshoring’s positive impact on the U.S. economy. Ray Lane cited a McKinsey study which found that every $1 spent on offshoring, resulted in a gain of 30 cents for the offshoring country and a gain of $1.13 for the home country. “The bigger issue is running a distributed development environment,” says Jim Green, chairman and CEO, Composite Software who has coordinated work across sites domestically and abroad and says it isn’t easy. “The issues are substantial. The emphasis needs to be on getting success in the research & development organization.”
A Balanced Approach to Growth. The CEO panel debated whether software companies are capable of continuing to grow organically or whether acquisitions are needed to facilitate growth. Opinions were mixed. “What we see within our company – and within our customers’ – is a focus on balanced growth. A combination of organic growth and getting more comfortable making acquisitions,” says Jeff Rodek, chairman and CEO, Hyperion Software. “There is a lot of focus on what factors will make that successful because the magnifying glass right now is very large for companies – on new new product launches, on acquisitions, on which customers to grow, or frankly, on which customers to kill and not grow, which products to grow and which not to grow… You have to make sure you can execute well because there is not much wiggle room in how the market will view your execution.”
Corporate Governance Rises to the Forefront. Several executives discussed the challenges of making their software companies models of good corporate governance. For example, securing today’s corporate networks and information against both intentional and unintentional attacks is a tremendous challenge. For this reason, information security has risen to one of the top priorities of global corporations and has been recognized as one of the tenets of good corporate governance. This emerging challenge is the impetus behind Sand Hill Group’s new research study, “A Blueprint for Enterprise Security: Execution Strategies from Industry Visionaries.” Released at the Software 2004 conference, the report is a synthesis of insight and best practices gleaned from dozens of interviews with leaders in enterprise information security – including several members of the Global Chief Security Officer Council. To find out more or purchase a copy, visit http://www.sandhill.com/enterprise_research_security.htm.
Final Thoughts for Software CEOs. Romesh Wadhwani, chairman of the Symphony Technology Group, proposed that software CEOS will exhibit the following behaviors in the next decade.
10) You’ll sell “liquid software.”
9) You’ll sell using a variety of pricing models.
8) You’ll pay attention to running the balance sheet, not the software technology.
7) You’ll mourn the death of the salesman and celebrate the life of the business process consultant.
6) You’ll replace your system integrator as your system integrator.
5) You’ll realize that the combination of open source and outsource is a very potent opportunity.
4) You’ll find mastery of vertical markets is your competitive edge.
3) You’ll enter the “Golden Age of Analytics” where the world of managing data ends and the time for insights begins.
2) You’ll see next-generation business performance management will be the killer app of the next ten years.
1) You’ll watch most software companies reinvent their business models in a large and strategic way.
M.R. co-founded Sand Hill Group (www.sandhill.com), and has been a strategic advisor to fast-growing companies such as Aspect Development and i2 Technologies. He held global VP marketing positions at Baan Company, Avalon Software, and Oracle Corporation. M.R. was profiled on the front page of the Wall Street Journal and was recently named in Forbes" "Midas 100 List" as one of the most influential investors in technology. M.R. can be reached for article feedback at: mr@sandhill.com
 
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