There was a comment to my last post about finding information in our industry (http://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…
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.
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.”