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Understanding Openness and Other Marketing Tactics in Laboratory Informatics and Other Industries

August 15, 2011

There was a comment to my last post about finding information in our industry (https://outonalims.wordpress.com/2011/08/12/more-tips-on-searching-for-laboratory-informatics-information-on-line/). I began to respond to that comment and realized that my own comments deserved their own post. Customers who are buying within various sectors of our industry need to understand something of the various strategies within the industry to understand how to find information and resources, depending on the size of the vendor they’re trying to buy from or work with, for example. They also need to understand how services affect their purchase even more than the product licensing.

So, here’s another side to the issue of openness and how it is used (or not) with the various marketing tactics. While these factors I’m about to list shouldn’t be considered true of absolutely every company, they serve us well as guidelines. What I’m about to say comes not just from my experience working with what was the #1 industry software vendor at the time of my employment, but also from working with smaller vendors and as a consultant both with small and large consulting companies before I started my own business. I also included my discussions with consulting firms in other industries, because the issues are the same in industries where the software model is the same.

Note about the tone of this post: since I’m writing this posting as a response to another comment, the tone in this post reflects that I’m continuing the conversation, as opposed to my usual post where I actually begin the conversation. So, here goes…

Price Comparisons
In industries such as ours where many products cannot be sold just as a piece of software to install without also buying services, the fees are meaningless for comparison purposes. For example, let’s suppose that ELN A costs $5,000/license and ELN B costs $10,000/license. But let’s also suppose that ELN A is a general-purpose system that would cost the customer quite a lot in services but that ELN B is built specifically toward their industry and will cost almost nothing in implementation services. Thus, customers really do have to continue to do the work to do a selection activity. Now, before you say that it’s in my best interests to say that merely because I sell product selection services, and there is actually some amount of truth to that, but I’d argue that most customers do this activity themselves and I do provide free articles and such on my web-site to help them do the best job of it that they can (http://www.geometrick.com/resources.html).

Here’s yet another example: the common structure is that software vendors charge the most for the services it takes to implement your software. Software vendors really do have to charge more to support the software development costs they incur, although they do find other ways to offer customers some amount of perks to try to make it worthwhile to buy those services over the cheaper services the standalone consulting companies would charge. However, lets suppose an independent company such as mine was charging half what you would charge your customers for those same services, as I’d have much less overhead. That doesn’t automatically mean that it really is half the cost to buy my services over yours. Here’s the problem: the final cost of services for a project are impossible to measure merely based on the hourly charge. If, between you and me, one of us was selling a super-experienced person and the other was selling a person that had no experience in your product, the one with the experienced person would probably cost the project the least, regardless the actual hourly rate. That’s another thing that can’t be measured by looking at services costs, which is why few services companies publicly print their prices. Thus, it’s not just the software vendors but also the services vendors that do not publicly post prices. In fact, notice that you won’t find my prices listed anywhere on my web-site, newsletter or blog. In the case of services, regarding the size of the company, there is typically no advantage to posting the hourly rate due to the issues I just mentioned.

Openness Isn’t For Everybody
Your company and mine are smaller companies in our industry. Just about every marketing course you or I would take that would tell us how to market our product and/or services would tell us to be open as a way to “get the word out.” After all, it’s the classic strategy for small businesses, the whole “guerilla marketing” thing they teach small businesses in the myriad of courses we take and books we read that are aimed toward us. It’s practically a textbook way of approaching our market.

On the other hand, big companies don’t operate in this same manner. While they have exactly the same tasks to do as you and I, they wouldn’t go about them in the same manner. Thus, a large company would usually keep everything proprietary to force everyone who needs information to go through them. Actually, being small, you couldn’t do this even if you wanted to because it’s a truly resource-heavy activity that can only be done by the largest companies – no-one else would have enough resources for this kind of control. Anyway, though, by doing this, they can try to control who learns about their system and who can work with it. After all, their problem isn’t to “get the word out” but, instead, to keep all the services done within their own domain so that they get that services money either directly or to get some cut of that money through their partners. Since the services end of our business usually costs the customers more than the licensing does, this is a truly significant block of money to be concerned about and not something that many vendors willingly let go of.

I don’t mean to say that you as a vendor do not also want to get all the services fees from your implementations, either, nor that you wouldn’t mind terribly if you lost the services side of a sale to a company like mine. However, some of the smaller vendors such as you see a sale of the product as one more opportunity to build a user base and to have a reference site, and are occasionally willing to take that opportunity at the cost of losing the services side of it.

Other Openness Issues
Even as an outsider working independently of the software vendors, I see various combinations to what I’ve just said.

For example, one software vendor I know has taken the closed tactic but has also decided that they want all their customers to have the most successful implementations possible and realize that they can’t actually control their entire market. With that in-mind, they don’t actually make their manuals and such public but they do give some resources to just about anyone who has an interest. They want to get everyone working on their product working together as much as possible doing the best job they can to make their product shine and, even though they really do want to get all the services for themselves, realize it’s not possible all the time. For those cases where they can’t get the services end of the sale, they still want it to go well and will try to be at least somewhat open with those who would work with their product.

As another example, I can think of yet another vendor who has decided that, since they built their software, they want all the services that go with it. They feel that no-one else can properly understand nor implement their product beyond their own people. Thus, they will stop at nothing to get the services end of the business and are entirely unwilling to share any information with anyone who wrenches the services end of their sale away from them. Realistically, they don’t actually get every services sale that goes with their product but they try their best to make that their goal.

Bottom Line
The issue of openness and marketing is done by each of our companies as we best think fits our company based on our company size and resources, as well as marketing positioning, and also based on what makes us the most money for each of our companies. Even though we try to pretend otherwise, most customers probably realize it’s for our benefit not theirs. Thus, it’s exactly why customers roll their eyes at our sales people when they say things like “we only have your best interests at heart.”

Gloria Metrick
GeoMetrick Enterprises
http://www.GeoMetrick.com/

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5 Comments leave one →
  1. August 16, 2011 3:28 pm

    Gloria, thanks for the thoughtful reply.

    With respect to services, I agree with your points. I have seen many job opportunities for teams of full time developers and consultants to implement a LIMS that is supposed to be COTS. Obviously there is a large gap between what the system can do out of the box and what these customers need or else there would not be such a huge need for so much services. This of course is dictated by what the customer’s needs are and which LIMS they choose.

    I do think it is pretty well given that TCO is Licenses plus Services plus subscriptions for maintenance and support. I have never met a customer that buys on license price alone and I have not seen any LIMS vendors that provide quotes in this way so I do think the acquisition process that customers follow works very well.

    Now with respect to open information, I guess you can call it a marketing and sales tactic but it seems that most of the large software vendors are using this “tactic”. Oracle provides all of the information you could possibly want as does SAP and Microsoft. So I would have to disagree that this is a small company “tactic”. My company embraced this “tactic” long ago because we saw how successful it was for the large software companies and further and most importantly it is what the customers want. So if it is a marketing tactic then it is a darn good one. I can only hope that other LIMS vendors will embrace this but if they do not, it is so much the better for those that do.

    Keep in mind that ALL LIMS vendors are really small software companies or small divisions in giant companies. The LIMS business is made up of nothing but small players when you compare them to what makes up the software industry on the whole. So I think this little industry really needs to learn from some of the folks outside of the LIMS industry. It is not healthy to be so insular and resistant to disruptive changes like Open Access. You basically have to learn how to put the person you serve ahead of yourself. Open Access is a great way to start practicing that idea.

  2. August 16, 2011 5:10 pm

    A couple pieces of clarification to those reading these comments. For one, TCO = Total Cost of Ownership. Also, for those wondering about the size of our market, I seem to remember that the entire laboratory informatics market is $300 million and that, in comparison, the ERP (Enterprise Resource Planning, such as SAP, Oracle, etc…) is at least an order of magnitude larger. If I’m remembering the figures wrong, I hope someone will jump in and correct me, though. But even at that, the ERP market is still not that big in comparison to some of the markets out there.

    With regard to MicroSoft, Oracle and SAP, I didn’t realize they did much that was particularly open. I do find a lot of 3rd party Oracle information but all based on people’s experience using the products more than having had help from Oracle, so I wasn’t aware there were other levels of information out there. I do get quite a bit from MicroSoft, but I pay for it, so that’s an area where it’s probably just hard for me to identify which is really free versus the bits that I’ve paid for, then.

    Comment on change, and maybe it’s cynical, but I think change almost never happens unless the market forces it to happen. If our market pushes us, enough, we will change (or go out of business).

  3. August 20, 2011 3:53 pm

    Yep, the big guys are quite open with information. They provide fully functional free trials of their software, extensive knowledge bases and discussion groups and absolutely tons of free video based tutorials, white papers, customer case studies and the list goes on and on.

    Just take a look at any LIMS vendor’s website and see if there are manuals, videos or even screen shots. The bulk of the information is simply brochureware. The main software industry left this tactic behind wll over 15 years ago.

    I can only explain this lack of information and openness as having less to do with the attempts to hide secret information in order to not let a competitor copy them and more a case that the companies are too small to afford to develop and publish all of this information and they simply do not have the time and resources to do it.

    Now there are some companies who actually think their LIMS is so unique that there is nothing like it to compare. I have found that this simply is not the case. There is nothing I can think of that any LIMS vendor is doing that is soooo great that it is patentable. So trying to keep a bunch of functionality secret in case a competitor sees it is too funny but worse, it hurts the customer who may be interested in their product.

    With today’s internet generation, one expects to google for the info and get what they need as they need it.

  4. August 22, 2011 9:21 am

    I disagree that the companies that don’t publish things avoid it because they’re so small. Most of the companies I know that routinely publish blogs and newsletters, work with open source, make their information public – they’re usually companies as large as mine. Since a company with one or even just a handful of people has to be motivated to do all this, we do it or we go out of business – plain and simple. Actually, some of the larger companies have told me they’re really like to be doing it but can’t quite get it together to actually do it (not all of them, of course, because some of the really large ones have newsletters and blogs, but just a few of them). In fact, a few have asked if they could pay me to do it for them or could hire me as an employee because they really would like to start. I would say there are a few reasons I know that they haven’t started these efforts, but I mean one or more of these reasons, not that they all share all these reasons:
    1. They’re so bureaucratic that they have a difficult time starting things that seem so small and insignificant compared to all the other tasks they have to do. Those of us who are small don’t talk about it or create a committee to “investigate” it, we just do it.
    2. They’re not motivated-enough. With small companies like mine, as I said, we make the time to do all this or we end up out of business, with the exception of a few people out there with strong lines of long-term business already set-up and that are going to provide the business with long-term business streams, and some of which are created only to provide to these specific business streams, to begin with.
    3. (1) and (2) I know to be true in some cases, but I also suspect there’s some fear by some companies that they might publish something they didn’t want made public. (3) is just a guess on my part, though.

    For those companies that would pay for me to do for them what I do for my own company, they’re missing the point. I can’t be excited about a product I don’t know anything about. I can be excited about my own services because I know them well and have a real interest in telling people about them. I can’t imagine the results would be desirable.

    You don’t have to believe me on this, but I’m telling you that I have quite a lot of experience talking with businesses my size and the larger ones on this exact issue. Also, I have been a member of quite a number of organizations for companies my size over the years I’ve had my business and the small businesses I network with all say the same thing, as do the books aimed at our market. I’m not saying anything unique or interesting, here, this is pretty standard stuff you could find in just about any “how to run your small business” book, seminar or networking meeting.

  5. August 22, 2011 3:56 pm

    Gloria, we are in agreement not disagreement. My view was that if you have the resources to do it you will and if you don’t you won’t and I have equated resources to size. This is loose thinking of course but it is not worth splitting hairs about. Your more detailed explanation is good for me and I believe it because I have seen it first hand.

    It’s too bad this is so true, because an informed LI consumer makes for a great customer. I think it acurately reflects the state of the LIMS/LI industry and it simply lacks the sophistication of the larger part of the software industry. Just my opinion.

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