Red Hat CEO Says Software Vendor Model Is Broken
alphadogg writes "The current model of selling commercial enterprise software is broken, charged the CEO for Red Hat. It is too expensive, doesn't address user needs and, worst of all, it leaves chief information officers holding all the risk of implementing new systems. 'The business models between customer and vendors are fundamentally broken,' said Jim Whitehurst, speaking Wednesday at the Interop conference in New York. 'Vendors have to guess at what [customers] want, and there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for.' Whitehurst estimated that the total global IT market, not including telecommunications, is about $1.4 trillion a year. Factor in the rough estimates that half of all IT projects fail or are significantly downgraded, and that only half of all features in software packages are actually used, then it would follow that 'easily $500 billion of that $1.4 trillion is fundamentally wasted every year,' he said."
How is it broken? There are different ways for companies to go by.
You can already buy commercial products that are made for general usage, like Microsoft Office. They can be feature rich products too, since they're used by many and different people and companies need different features. Since the products are made for large amount of customers, price for a single user or company is relatively low.
If you require something that the commercial products don't offer, you can either hire a development house to build it for you or do it in-house. That way you get exactly what you need, but the price is higher since it's made specially for you. If there is a mismatch between what you want and what commercial products offer, you go this route.
Now, the CEO of Red Hat basically says that model is broken, but offers no alternative. He says open source magically fixes it my offering services and support. But what is there to offer if the companies still need to go the second route if such product doesn't exist? And if it exists, what is broken with the commercial model? They do also offer support.
Seriously, who the fuck didn't know?
Under the influence of Post-Cyberpunk Gonzo Journalism
perhaps the vendor the CEO was talking about was the one he knows best.
The summary suggests that money could be saved by not developing the half of all features which are will not used. How can you tell which features will be used before you develop them?
...buy some Red Hat products.
Steve Jobs already solved this "mess for both users and developers, Contrast this with Apple's integrated App Store, which offers users the easiest-to-use, largest app store in the world, preloaded on every iPhone.'"
The solution is obvious: integrate all sales under Apple!
Whitehurst touches on the emergence of cloud computing in the enterprise as well, and this is integral to an intelligent discussion of the imminent death of the traditional licensing system of enterprise software. From TFA:
""People say [they are interested in the] cloud but what they are really espousing are frustrations with existing IT business models," Whitehurst said in an interview with IDG News Service after the presentation. Whitehurst kicked off his talk by asking a seemingly simple question: "Why are costs of IT going up when the underlying costs to deliver those services halves every 18 months?" The cost of computing should come down, he reasoned, thanks to improving processing speeds and storage capacities. New, more powerful development tools and frameworks should also ease the cost of deployment. Yet IT expenditures continue to go up by about 3 percent to 5 percent a year.
That ease in the cost of deployment, coupled with the flexible infrastructure the cloud supplies, will eventually mean the death of the traditional "per-proc" style of enterprise licensing. Happily, it likely means fantastic opportunities for open-source to take back a large share of the market. I've spent the last year migrating my medium-sized enterprise to the cloud AND a near-100% opensource infrastructure. In my particular sector (healthcare) that's becoming a trend - it's not a coincidence that the move within the medium to medium-large enterprise to the cloud often goes hand-in-hand with a serious investigation of open-source software within the mission-critical, production infrastructure.
Deja Moo: The distinct feeling that you've heard this bull before.
Just like war, commuting and other essentially completely worthless phenomena, waste of programmer time makes money exchange hands, and therefore increases GNP.
In this case: who would want to be the first to go out on a limb publically and say "I want to decrease the IT sector by 50%"?
Don't blame me, I didn't design that stupid measure.
F#ck yeah, and I want my share!
Perhaps I'm trolling, perhaps I'm not.
But from his original statement:
That's because as it because possible to do more in X hours ... more is demanded by management.
As more space becomes available, more data is stored. Older data is not discarded.
So we had a major upgrade project. Our old authentication software on old hardware was going to be replaced with new software, new hardware, and a new architecture made possible by the features in the new software.
Months of planning, rearchitecting, tripping over bugs ("oh, it's fixed in the next major version"), and testing, and it turns out that the software from vendor A does not work acceptably on the hardware from...vendor A.
Throw the plan out, and start from scratch on new hardware. Halfway through, vendor A (who by this time has been bought by Vendor B) changes their licensing/maintenance model, such that it will cost us an extra million and a quarter dollars (!!!) PER YEAR (!!!!!) to use their crappy software. Add an extra $50k to license their OS if we don't buy hardware from them.
(Yes, you can probably guess who A and B are :-)
Lucky for us, a new vendor rose from the ashes of an exploding corporate division, and is writing competent code. They also seem to be capable of supporting their own product. Not everyone is as "lucky" as us though, to make something work the third time.
To be fair, the $1.4 trillion in software costs will have little or nothing to do with the 40% of failed projects. Nobody of a reasonable size pays for software until it goes into production.
"People who do stupid things with hazardous materials often die." -- Jim Davidson on alt.folklore.urban
The business models between customer and vendors are fundamentally broken,' said Jim Whitehurst, speaking Wednesday at the Interop conference in New York. 'Vendors have to guess at what [customers] want, and there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for.'
Yes! There are so many features that end up being hindrances or that fall short of actual needs that it makes an investment not worth while. For example, here's what I want out of just my cell phone:
My Cell Phone (Rumor2) needs to:
Make and receive phone calls (Grade: A)
Keep a phone book (Grade: A)
Send text messages using a mini keyboard (Grade: A)
Play MP3s (Grade: D-)
--3.5mm headphone jack (Grade: F)
--Drag/Drop micro usb computer interface (Grade: C)
--Easy playlist, enqueue functions (Grade: F)
Serve as an impromptu, good-enough camera as needed and transfer photos to another cell and to a computer (Grade: B)
Take a micro-SD 8GB card (Grade: A)
Have the option for a low-graphic, low-power GUI. (Grade: C)
Be included with the $40/month 2-year contract that allows for limited cell-to-cell photo transfer, unlimited nights/weekends, unlimited texting.
That's what I need... this is what else my phone tries to do:
Connect me to a Sprint-only pseudo-internet as well as the real internet
Sell me games for my phone
Sell me ringtones (while not allowing me to make my own)
Be GPS
And I know I'm not alone. It's not like I want a rotary phone attached to my hip, but I don't want to be SO WIRED all the time. Give me a tablet PC that runs as Ubuntu Netbook Remix (or some other low-graphic moddable UI) for $400, the phone that fulfills only the needs I list above, and a desktop PC and I'm set. That's it. Game over.
Duh, if software's priced as an exclusive, transferable asset where one person's possessing a copy excludes another from getting one, then of course it's broken. The price of software would ideally be adjusted to do three things:
* security
* drive the developers to add capabilities and fix bugs where it's needed
* extract money from customers in a way that maximizes value
Support contracts seem like they would do a better job of all three than outright sales, so I'd expect RedHat to understand this, but saying that "$X is wasted" makes it sound like he's still thinking of software like an exclusive asset. With these three goals, money cannot be wasted. Rather, software can be less secure than it should, developer time can be wasted, and customers can get a bad value because the vendor's revenue isn't extracted from them optimally. None of these three things is close enough to "waste" to even make a good analogy.
...is that we don't want to "rent" the software.
(which is how Red Hat makes its money: on maintenance)
The endless cycle of maintenance upgrades for the sake of compatibility with other software that has been upgraded for the sake of compatibility with...
That is what needs to be fixed for enterprise customers, but it goes directly against the business interests of the software vendors. We'll never see that fixed...
A pox on web designers who feel that window.innerWidth == screen.availWidth
If all Software and IT needs were being funneled into new projects and new features and new ideas then the Red Hat guy might be write. This is not the case however. Most Software development done in the world is based on specific needs generated by specific customers on existing IT systems. It is a painfully slow, deliberate process that sometimes produces astonishingly public failures. Most of the time what is produced is quite successes that for the most part do what the customer wanted done.
A couple of years ago my organization switched from Silicon Graphics workstations running an ancient C++ compiler to Red Hat Linux on Dell workstations. It took us about six months to migrate the code from one platform to another. We didn't develop new features that nobody wanted. We didn't create waste where none existed. What we did is exactly what the customer paid us to do.
Vendor driven software that is created with an unknown user in mind is usually pretty scary in that you are always going to get features you didn't want and features that you do want but they don't work well. Guess what, that's what you get for making a product that is designed for the general propulation. Cars are the same way. I want a Toyota Truck, and I want a really cool sound system. They don't sell them that way. I get the adequate sound system that Toyota provides, it kind of does what I want, but if I want better I am going to have to by better, and even then it make not work 100% in my truck, and it will most certainly do things I didn't want it to do.
This isn't, for the most part, waste. Waste is what you get when you contract a software system to build, it takes five years, costs 100 million, thirty developers, and then when you are two weeks from shipping sales tells you that they can't sell your stuff. However, for every one of those types of projects there are literally dozens that didn't get cancelled and were shipped to sometimes eager customers.
Beware the wood elf!!!
... I'm sorry to say it but listening to what customers want more often then not is a recipe for disaster, what I think needs to happen are specialists who specialize in trying to assess people things need but don't know they yet want. The whole idea that people are good at self-analysis of what they need/want for their organization is the issue, some times you get customers who are but more often then not your customers are clueless.
[evil]As a guy who puts together some of the software packages you buy I can tell you that bundling of commonly and rarely used functionality often happens by design. And it doesn't just happen in the software industry: car manufacturers do it when they bundle their options too. The advantages of bundling for the buyer are: fewer choices (shorter lead time if you know what you want) and better budgeting (fewer trips "back to the well" for more money); the advantages for the seller are: cost containment (fewer combinations to test and support), tighter brand control (the "SE edition" instead of "features 12 and 15") and higher prices (less ability to buy smaller increments of functionality). The risk we take as a vendor is always that someone will provide a better package of benefits for a better price, but it continually surprises me closely IT consumers in any particular market will track to the pack - even paying an order of magnitude more for similar features available from an innovative competitor - the "better mousetrap" is usually only a secondary risk.
Before someone hops on here and says "the cloud will break this model", please remember that another widely-used on-demand service called "cable TV" has already figured out the bundling concept and applied it viciously. (Ever wish you could just buy ESPN and SciFi?) Once various SaaS, PaaS and IaaS industries stabilize, I'd bet bundling of "features I never use" will be a common complaint here too - and you'll keep buying nonetheless. [/evil]
Companies developing software are still raking in billions of dollars. Maybe stop giving the shit away for free...
did you forget to take your meds?
it's nice to list what you want, but others want something else too. That's just the way the world works. It's just QQ to me
did you forget to take your meds?
Jim said the same stuff during his keynote at the recent Red Hat Summit 2010. If you want to see it, watch the video here: http://www.redhat.com/videos/summit2010/Jim_Whitehurst.html
Scott Dowdle
www.MontanaLinux.Org
Our business model is better, says CEO of company using said business model. Followed by, "maker of widgets says widgets are great". This needs to be tagged "slashvertisement" or something along that line.
I happen to consult on packages software in the financial service industry - and while the technology is yucky, the sales drive/strategy model is broken the fundamental issue is ALWAYS business. Businesses should stop blaming everybody else for their problems. In the end of the day business is responsible for choosing their vendors and their implementation partners. They are free to set project constraints. They are free to do contracting in ways that better suit them. 1) Businesses should make sure procurement is done by people who know what they are doing. 2) Businesses should implement decent program and project management from the very beginning. So while I keep hearing that vendor X software is bad because the project failed - in me I know: Customer selected wrong vendor/technology, or customer selected wrong implementation partner, or customer did not manage the job from their side, or they had some political infighting (one of the sites I worked on had 18 data warehouses. and none of them could give a complete picture of organization. of course the reason for that is that they were essentially under control of different factions within the organization. ) Red Hat can say all they want about "Enterprise Software Sale Model", but I can guarantee that if the world was fundamentally different and all software was GPL open source --- the wastage would have been exactly the same. People would blow money on implementation cost. People would use the argument "but it is open source so you can modify it" so that each organization would end up maintaining its own individual branch (which would negate all the benefits of community development ). Business would keep on spending millions on getting consultants with science and engineer degrees to change fonts on screens. So while I do like open source, and I dislike enterprise license and "maintenance" fees the port of call would be to actually start managing your business efficiently. This is the reason I suspect "cloud computing" will be successful. Not because of technical reasons, but because it literally takes away a lot of the power AWAY from business and package it is as something else.
worst of all, it leaves chief information officers holding all the risk of implementing new systems.
*begin ill-tempered, sleep-deprived rant*
I can certainly understand why some suited weasels would want to buy their way out of any personal responsibility, but seriously, ISN'T THIS EXACTLY WHERE THE RISK BELONGS?! I thought that's why we paid them all that money, because they had the 'l33t business and organizational skills to handle the risk, like professional ball players. They're "superstar talent," remember?
God forbid a CIO actually have the get off their fat ass and, you know, TEST an implementation before it goes into production. Oh no, better to just let me get another 3 am panicked call because some jackass can't read...
*end vent*
He put his boots up on the table and made a face. "The sig," he smirked. "You can waste your life in search of the sig."
were still used by somebody, and typically that's the biggest customer of that software. For instance, in the world of enterprise software, when you're a small upstart company, you first innovate to create the first release. They you add the project managers and the MBAs, and you need justification to add new features, and that's usually coming from demands from the biggest customers who threaten to kick you out and cancel the maintenance money.
So why are there features in the product that 50% of the customers dont use? The big customer's environment isn't a model of reality, and software developers aren't necessarily building the most pragmatic software or what the market as a whole needs, but what pays the bills.
A different model applies to the open source world, where software gets developed because the work's interesting to someone who often does it because they like working on it more than financial gain. Yet these features exist even without someone necessarily (or even most) people needing it.
It's odd that Red Hat is sticking their neck out and saying that software developers are making features that nobody needs. You don't have to look further than a Linux distribution to see a set of software repositories full of features that "most people don't need", but it's useful to somebody. There's no reason to discount its existence - it's there if you need it, but for the most part, there aren't many users that need to download every single package. You use what you need and don't need to bemoan that the rest exists.
It sounds like Red Hat's asking for everyone to take their Model T software package and be happy with what the manfacturer gives you, and pray that you get what you need because you're not getting any more.
It costs nearly $0 to deliver a unit of software, no matter the feature set included.
So when someone buys a package to get one feature and is the only user of that feature, then he pays the full price of the software to get that feature.
And everyone else pays the full price to get the features they want and can safely ignore that feature, or try it out and start using it if they wish.
None of them, not one, came close to paying the full development cost for any feature they're using, but all, in aggregate, will pay for the development, marketing, G&A, yadda, yadda, yadda, just like people who buy cars or pizzas.
Basically my job revolves around operating and maintaining a database and front end that costs my employer no small amount of money. I came into my position between the last time the contract with this particular vendor was signed and now... when the renewal was due. Our account rep with this particular vendor sent their quote to my team to be forwarded on to our management, and as I read it I almost choked. They basically wanted to increase our rate by 1600%. Our IS department HATES software that we lease/rent/buy from 3rd parties. They are always of the opinion that they could do whatever the software we are using is doing, better, cheaper and faster. They are, of course, actually usually slower, twice the price and the application never works the way its intended. But when you take a quote to your managers that raises your rates 1600% they are inevitably going to head strait to the over paid script kiddies we consider our programming department to see what they can do.
After my initial shock I reviewed the quote and found that they were charging us for some of the most ridiculous things. $20 per gigabyte of storage. $300 per seat of logged on users as long as they don't exceed so many page requests per day. If they do exceed their allotted amount of request then they enter a higher billing rate. So our licenses have burstable rates? On top of these we get charged per table, per data point, even per API request. We get charged for backups, for custom fields, for upgrades for just about every action or even inaction we take with the software. The end result was a contract that was over a hundred pages long and took a team of lawyers several weeks to decode into human language.
So I thoroughly agree with the CEO of Redhat. I also hope I still have a job in the next couple of weeks.
Top-down management tends to fail when attempting projects of such complexity for the same reason controlled (non-competitive) economies tend to collapse. The vendors are only culpable because they encourage it with a great lie.
Comment removed based on user account deletion
Ok, you're correct by tautology. I want something as do other people. Bravo! But you're not really commenting in the context of the article. You call it "QQ", but the Red Hat CEO calls it wasting hundreds of billions of dollars shotgunning bad features at users that don't want them.
It's an insane idea, but even the auto manufacturing industry modulizes features better than the tech industry.
Base Car = 15,000
Automatic Transmission = 1200
Built-in GPS = 500 + any subscription fee
Bigger engine = 1000
Alloy Wheels = more
"racing" suspension = more
etc
etc
AND when adding options that affect fuel efficiency, they note it! With devices like cell phones it's simply "We'll give you everything, charge you for everything, and you'll like it".
That's not "QQ", sugar britches. That's hoping one industry's common sense approach to sales catches on in the market I use more than once every 10 years.
This is a subject I know something about. Cable TV pricing for ESPN is complex, because ESPN has multiple revenue streams. ESPN advertising revenues depend not only on the number of actual viewers, but on the number of potential viewers as well. The price sheets are tightly-held secrets, but a cable company with 16 million subs (subscribers) buying bundles that include ESPN pays much less per-sub to ESPN than a cable company with only a million subs buying such bundles. A la cart is even worse. A big operator like Comcast or DirecTV may pay $4 per month per sub for each sub buying the channel as part of the bundles. If it is only available as an a la cart service, the charge may be $12-16 per month, paid directly by the sub. When we looked at it several years ago, the break-even point was surprisingly low, around three-four channels, particularly if they were sports channels.
The sports channels, ESPN in particular, have insane costs to cover. ESPN paid $8.8B for Monday Night Football rights the last time the NFL negotiated their contracts. 3.5 hours/week, 17 weeks/yr, a small number of years, $8.8B. Takes a big a la cart charge to cover that.
Big companies love to buy expensive software that doesn't do much. This isn't the problem of the people developing the enterprise software, it is the problem with the people buying it. There are plenty of smaller companies that make great enterprise software that is designed to fit the users needs. I work for a company that does this. But our big competitors get all the sales. We often have potential sales where the people who will use the software want to go with us, but the executives want to go with the big, expensive companies. Guess who wins.
If the people who have the purchasing power cared about the software fitting the users needs, the big enterprise players would do more of this. But they really don't care.
How else does Sharepoint exist? I have yet to see it do anything well. Finding and accessing files is easier over CIFS/SMB. Version control works better with Subversion (which isn't that good to start with). When I worked for a company that switched to Sharepoint, it made my job harder. Yet all the big companies are running it.
That is how the auto companies list the prices on the sticker, but try to actually buy a car that has just the features you want (for example, bigger engine but no alloy wheels). Most of the time you will find the options are only sold in packages, pretty much like different 'editions' of software.
A textbook example of samefag
http://encyclopediadramatica.com/File:Samefag_Matrix.jpg
In the early 80s 2 groups existed. One was to only use prepackaged software and the other is to use your programmers to create your own solution. His rant backs the former group but unfortunately it is viewed as an expense commodity that does not add value to a ROI. The battle to use prepackaged software has won. Until investment is viewed as a profit center and not a cost center no business will bother to hire programmers to create software to do what it is they need to do rather than buy a prepackaged bloatware that may or may not work.
http://saveie6.com/
See but I want GPS. And if it costs the manufacturer $1.50 for the GPS chip then why do you care if I get GPS?
He's just noticing the emperor is naked? 15 years ago, in PC Magazine, there was a review of word processors, and they pointed out that 90% of the users only used 10% of the features, and the 10% who used the other 90% of those features only used them 10% of the time.
So, how much of all the features do *you* use with a word processor? Or any of the software you use regularly?
For one thing, it's a treadmill for the sole purpose of reselling you the same thing, over and over. I've a friend who *has* to upgrade Quicken every few years, even though he doesn't need any of the new "features", because they won't support (tax rate updates, online things) if he doesn't.
mark
Your analysis is wrong; it's a classic example of the Broken Window Fallacy.
-- 77IM
Student: Is it true that the foundation of the universe is paradox?
Master: Well, yes and no.
Sorry! From the subject ("Waste is what drives the economy") and the assertion that removing waste would shrink the IT sector, it sounded like you were pro-broken windows. (Removing waste spending would allow the IT sector to move on to bigger and better things.)
I agree that the way we as a society think about things like "wealth" and "growth" is pretty screwed up. Hopefully a person will read this thread and learn more and make all our typing worthwhile. Now, I need to go back to implementing workarounds for bugs in IIS 7 ASP.NET, when I could be off writing features...
-- 77IM
Student: Is it true that the foundation of the universe is paradox?
Master: Well, yes and no.